<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
CARRIZO OIL & GAS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(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):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
[CARRIZO LOGO]
April 21, 1998
Dear Fellow Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Carrizo Oil & Gas, Inc. (the "Company") to be held at 10:00 a.m. on Wednesday,
May 20, 1998 at the Houston Marriott Westside, 13210 Katy Freeway, Houston,
Texas.
This booklet includes the notice of the meeting and the proxy statement,
which contains information about the Board and its committees and personal
information about the nominees for the Board. Other matters on which action is
expected to be taken during the meeting are also described.
We hope you will find it convenient to attend in person. Whether or not you
expect to attend, to assure representation at the meeting and the presence of a
quorum, please date, sign and promptly mail the enclosed proxy in the return
envelope provided.
A copy of the Company's 1997 Annual Report to Shareholders is also
enclosed.
Sincerely,
/s/ S. P. Johnson
S. P. JOHNSON IV
Chief Executive Officer
<PAGE> 3
CARRIZO OIL & GAS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 20, 1998
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 Houston Marriott Westside,
13210 Katy Freeway, Houston, Texas, on Wednesday, May 20, 1998 at 10:00 a.m. for
the following purposes:
(1) to elect six members to the Board of Directors for the ensuing year;
(2) to approve the appointment of Arthur Andersen LLP as independent public
accountants of the Company for the fiscal year ending December 31,
1998; and
(3) to transact such other business as may properly come before the
meeting.
The Company has fixed the close of business on April 16, 1998 as the record
date for determining shareholders entitled to notice of, and to vote at, such
meeting or any adjournment thereof.
You are cordially invited to attend the meeting in person. Even if you plan
to attend the meeting, you are requested to mark, sign, date and return the
accompanying proxy as soon as possible.
By Order of the Board of Directors
/s/ FRANK. A. WOJTEK
Frank A. Wojtek
Secretary
April 21, 1998
14811 St. Mary's Lane, Suite 148
Houston, TX 77079
<PAGE> 4
CARRIZO OIL & GAS, INC.
14811 ST. MARY'S LANE, SUITE 148
HOUSTON, TEXAS 77079
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Carrizo Oil & Gas, Inc., a Texas
corporation (the "Company"), to be voted at the 1998 Annual Meeting of
Shareholders (the "Annual Meeting") to be held at the Houston Marriott Westside,
13210 Katy Freeway, Houston, Texas on Wednesday, May 20, 1998 at 10:00 a.m., and
any and all adjournments thereof.
This statement and the accompanying form of proxy are first being mailed to
shareholders on or about the week of April 21, 1998. In addition to the
solicitation of proxies by mail, regular officers and employees of the Company
may, without additional compensation, solicit the return of proxies by mail,
telephone, telegram or personal contact. The Company will pay the cost of
soliciting proxies in the accompanying form. The Company will reimburse brokers
or other persons holding stock in their names or in the names of their nominees
for their reasonable expenses in forwarding proxy material to beneficial owners
of stock.
VOTING SECURITIES
Shareholders of record as of April 16, 1998, 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 10,375,000 shares of Common Stock, par value $0.01 per
share (the "Common Stock"), and 306,225 shares of 9% Series A Preferred Stock,
par value $.01 per share (the "Series A Preferred 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. The Series A Preferred Stock will
not be entitled to vote at the Annual Meeting and generally has no right to vote
for directors or on other matters except in certain specified circumstances or
as required by law. Cumulative voting is not allowed. The holders of a majority
of the shares entitled to vote at the Annual Meeting, represented in person or
by proxy, constitute a quorum for the transaction of business at the Annual
Meeting.
All duly executed proxies received prior to the Annual Meeting will be
voted in accordance with the choices specified thereon and, in connection with
any other business that may properly come before the meeting, in the discretion
of the persons named in the proxy. As to any matter for which no choice has been
specified in the proxy, the shares represented thereby will be voted by the
persons named in the proxy, to the extent applicable, (1) for the election as a
director of each nominee listed herein; (2) for the appointment of Arthur
Andersen LLP as independent public accountants of the Company for the fiscal
year ending December 31, 1998; and (3) in the discretion of the persons named in
the proxy in connection with any other business that may properly come before
the meeting. A shareholder giving a proxy may revoke it at any time before it is
voted at the Annual Meeting by delivering written notice to the Secretary of the
Company or by delivering a properly executed proxy bearing a later date. A
shareholder who attends the Annual Meeting may, if he or she wishes, vote by
ballot at the Annual Meeting and that vote will cancel any proxy previously
given. Attendance at the Annual Meeting will not in itself, however, constitute
the revocation of a proxy.
Proxies indicating shareholder abstentions will be counted for purposes of
determining whether there is a quorum at the Annual Meeting, but will not be
voted on any matter and therefore will have the same effect as a vote against a
matter, except in the case of director elections, which are determined by a
plurality of votes cast, as to which those abstentions will have no effect.
Shares represented by "broker nonvotes" (i.e., shares held by brokers or
nominees for which instructions have not been received from the beneficial
owners or persons entitled to vote and for which the broker or nominee does not
have discretionary power to vote on a particular matter) will be counted for
purposes of determining whether there is a quorum at the Annual Meeting, but
will not be voted on any matter, and thus will be disregarded in the calculation
of "votes cast" with respect to that matter (even though those shares may be
considered as entitled to vote or be voted on
<PAGE> 5
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.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The table below sets forth information concerning (i) the only persons
known by the Company, based on statements filed by such persons pursuant to
Section 13(d) or 13(g) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), to own beneficially in excess of 5% of the Common Stock as of
April 1, 1998 and (ii) the shares of Common Stock beneficially owned, as of
April 1, 1998, by each director, the nominee for director, the Chief Executive
Officer and the three other executive officers who were serving at the end of
the Company's last fiscal year and by all executive officers and directors
collectively. Except as indicated, each individual has sole voting power and
sole investment power over all shares listed opposite his name.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
-------------------------------
PERCENT
OF COMMON
STOCK(2)
NAME AND ADDRESS OF BENEFICIAL OWNER(1) NUMBER OF SHARES (ROUNDED)
- --------------------------------------- ---------------- ---------
<S> <C> <C>
Directors and Executive Officers:
S. P. Johnson IV..................................... 783,085(3) 7.5%
Frank A. Wojtek...................................... 1,273,721(3) 12.3%
George Canjar........................................ 111,060(4) 1.1%
Ken Trahan........................................... 49,977(4) *
Steven A. Webster.................................... 1,547,882(3)(6) 14.9%
Douglas A. P. Hamilton............................... 800,796(3) 7.7%
Paul B. Loyd, Jr. ................................... 1,429,256(3) 13.8%
Executive Officers and Directors as a Group (7
persons).......................................... 5,995,777(8) 56.9%
Roberto Marsella..................................... 208,764(9) 2.0%
Kenneth Huff......................................... 441,694(10) 4.3%
DAPHAM Partnership, L.P. ............................ 395,960(3)(11) 3.8%
The Douglas A. P. Hamilton 1997 GRAT................. 200,000(3)(12) 1.9%
</TABLE>
- ---------------
* Less than one percent.
(1) Except as described in note 3 below or otherwise noted and pursuant to
applicable community property laws, each shareholder has sole voting and
investment power with respect to the shares beneficially owned. The
business address of each director and executive officer is c/o Carrizo Oil
& Gas, Inc., 14811 St. Mary's Lane, Suite 148, Houston, Texas 77079.
(2) The table includes shares of Common Stock that can be acquired through the
exercise of options, warrants or convertible securities within 60 days. The
percent of the class owned by each person has been computed assuming the
exercise of all options, warrants and convertible securities deemed to be
beneficially owned by that person, and assuming that no options, warrants
or convertible securities held by any other person have been exercised.
(3) Pursuant to a Shareholders' Agreement dated January 8, 1998 among the
Company, S.P. Johnson IV, Frank A. Wojtek, Steven A. Webster, Douglas A. P.
Hamilton, Paul B. Loyd, Jr., DAPHAM Partnership, L.P., the Douglas A. P.
Hamilton 1997 GRAT, Enron Capital & Trade Resources Corp. and Joint Energy
Development Investments II Limited Partnership, certain shareholders of the
Company may be deemed to have formed a group pursuant to Rule 13d-5(b)(1)
promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Nothing herein shall constitute an affirmance that any
such group exists; however, such group could be deemed to have beneficial
ownership, for purposes of Sections 13(d) and 13(g) of the Exchange Act, of
all equity securities of the
2
<PAGE> 6
Company beneficially owned by such parties. Such parties would, as of April
1, 1998, be deemed to beneficially own an aggregate of 6,373,834 shares
(61.4%). Each party to the Shareholders' Agreement listed above disclaims
beneficial ownership of any common stock owned by the other parties to the
Shareholders' Agreement.
(4) Consists of 111,060 options exercisable within 60 days of April 1, 1998.
(5) Consists of 49,977 options exercisable within 60 days of April 1, 1998.
(6) Shares shown represent 1,491,016 shares of Common Stock owned by Mr.
Webster and 56,866 shares owned by Cerrito Partners, of which Mr. Webster
is one of three general partners and could be deemed to share voting and
dispositive power with the other general partners. However, Mr. Webster
does not admit to having such power and disclaims the beneficial ownership
of the Common Stock held by Cerrito Partners.
(7) Does not include (i) 395,960 shares of Common Stock beneficially owned by
DAPHAM Partnership, L.P., the limited partner of which is a charitable
remainder trust of which Mr. Hamilton, his wife and children are among the
beneficiaries, (ii) 200,000 shares of Common Stock beneficially owned by
the Douglas A.P. Hamilton 1997 GRAT, of which Mr. Hamilton is the sole
beneficiary until October 2002 and (iii) 14,472 shares of Common Stock
beneficially owned by certain trusts established for the benefit of Mr.
Hamilton's children, and for each of which Mr. Hamilton's wife serves as
trustee. Mr. Hamilton disclaims beneficial ownership of all of such shares.
(8) Includes 161,037 options exercisable within 60 days of April 1, 1998.
(9) Includes 15,563 shares of Common Stock owned by Mr. Marsella's wife. Mr.
Marsella disclaims beneficial ownership of such shares.
(10) Shares shown represent (i) 395,960 shares owned directly by DAPHAM
Partnership, L.P., of which Mr. Huff is the general partner, and (ii)
45,734 shares owned by Mr. Huff. The business address of Mr. Huff is 9256
N. Pelham Parkway, Milwaukee, Wisconsin 53217.
(11) The address of DAPHAM Partnership, L.P. is 462 Broadway, Second Floor, New
York, New York 10013.
(12) The address of the Douglas A.P. Hamilton 1997 GRAT is 900 Third Avenue, New
York, New York 10022, and its trustee is Mr. Kim E. Baptiste.
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 1999 Annual Meeting of Shareholders and
until their successors have been duly elected and qualified: Mr. S.P. Johnson
IV; Mr. Frank A. Wojtek; Mr. Steven A. Webster; Mr. Douglas A.P. Hamilton; Mr.
Paul B. Loyd, Jr.; and Mr. Roberto Marsella. 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 six nominees for
election as directors at the Annual Meeting, including information as to each
nominee's age as of April 1, 1998, position with the Company and business
experience during the past five years.
3
<PAGE> 7
S. P. Johnson IV, age 42, has served as the President, Chief Executive
Officer and a director of the Company since December 1993. Prior to that, he
worked 15 years for Shell Oil Company. His managerial positions included
Operations Superintendent, Manager of Planning and Finance and Manager of
Development Engineering. Mr. Johnson is a Registered Petroleum Engineer and has
a B.S. in Mechanical Engineering from the University of Colorado.
Frank A. Wojtek, age 41, has served as the Chief Financial Officer, Vice
President, Secretary, Treasurer and a director of the Company since 1993. In
addition, from 1992 to 1997, Mr. Wojtek was the Assistant to the Chairman of the
Board of Reading & Bates Corporation ("Reading & Bates", an offshore drilling
company). Mr. Wojtek also holds the positions of Vice President and
Secretary/Treasurer for Loyd & Associates, Inc. (a private financial consulting
and investment banking firm). Mr. Wojtek held the positions of Vice President
and Chief Financial Officer of Griffin-Alexander Drilling Company from 1984 to
1987, Treasurer of Chiles-Alexander International Inc. from 1987 to 1989 and
Vice President and Chief Financial Officer of India Offshore Inc. from 1989 to
1992, all of which are companies in the offshore drilling industry. Mr. Wojtek
is a Certified Public Accountant and holds a B.B.A. in Accounting from the
University of Texas.
Steven A. Webster, age 46, has been the Chairman of the Board of the
Company since June 1997 and has been a director of the Company since 1993. Mr.
Webster is Chief Executive Officer, President and a director of R&B Falcon
Corporation ("R&B Falcon"), an offshore drilling company that was created by the
merger of Falcon Drilling Company Inc. ("Falcon") and Reading & Bates. Mr.
Webster was the Chairman and Chief Executive Officer of Falcon, an offshore
drilling company, and its predecessor companies from 1988 until such merger in
December 1997. Mr. Webster is also a director of Grey Wolf, Inc. (an onshore
drilling company), Crown Resources Corporation (a precious metals mining
company), Geokinetics, Inc. (a seismic acquisition and geophysical services
company) and Ponder Industries, Inc. (a mining company). He is a trust manager
of Camden Property Trust (a real estate investment trust). Mr. Webster holds an
M.B.A. degree from Harvard Business School.
Douglas A. P. Hamilton, age 51, has been a director of the Company since
1993, Falcon from 1992 to 1997 and R&B Falcon since December 1997. Mr. Hamilton
has since 1979 been the President of Anatar Investments, Inc., a diversified
investment capital firm with active investments in oil and gas and offshore
contract drilling and is a co-owner of the French Culinary Institute, a cooking
school in New York City. Mr. Hamilton has a degree from the University of North
Carolina and completed the PMD program at Harvard Business School.
Paul B. Loyd, Jr., age 51, has been a Director of the Company since 1993.
Mr. Loyd is the Chairman of the Board of R&B Falcon. Mr. Loyd was Chairman of
the Board and Chief Executive Officer of Reading & Bates from 1991 to 1997 and
President of Reading & Bates from 1993 to 1997. Mr. Loyd has been President of
Loyd & Associates, Inc., a financial consulting firm, since 1989. Mr. Loyd was
Chief Executive Officer and a director of Chiles-Alexander International, Inc.
from 1987 to 1989, President and a director of Griffin-Alexander Drilling
Company, from 1984 to 1987, and prior to that, a director and Chief Financial
Officer of Houston Offshore International, all of which are companies in the
offshore drilling industry. Mr. Loyd is also a director of Wainoco Oil
Corporation. Mr. Loyd served as President of the Company from its inception in
September 1993 until December 1993. Mr. Loyd holds an M.B.A. degree from Harvard
Business School.
Roberto Marsella, age 33, has been with Deutsche Morgan Grenfell, the
investment banking subsidiary of Deutsche Bank, since 1996. He is a Managing
Director in the Structured Finance Division. From 1990 to 1996, Mr. Marsella was
with UBS Securities, the investment banking subsidiary of Union Bank of
Switzerland, most recently as a Managing Director in the Investment Banking
Department. Mr. Marsella holds an M.B.A. from the Leonard School of Business of
the New York University and a B.B.A. from L. Bocconi University in Milan, Italy.
COMPENSATION OF NON-EMPLOYEE DIRECTORS
Directors not employed by the Company or any of its subsidiaries ("Outside
Directors") receive an annual retainer of $7,500. Directors who are also
employees of the Company receive no payment for serving as directors. All
directors are reimbursed for travel and lodging expenses of attending meetings.
Under the
4
<PAGE> 8
Company's Incentive Plan (the "Incentive Plan"), each current Outside Director
has been granted options to purchase 10,000 shares of Common Stock. Thereafter,
each additional Outside Director will be automatically granted nonqualified
options to purchase 10,000 shares of Common Stock on the date that person first
becomes an Outside Director of the Company. In addition, each Outside Director
serving on the day after the date of the annual meeting of shareholders will
automatically be granted options to purchase an additional 2,500 shares of
Common Stock, subject to the availability for issuance of those shares under the
Incentive Plan. During the fiscal year ended December 31, 1997, options to
purchase 10,000 shares were granted to each of Messrs. Webster, Hamilton and
Loyd at an exercise price per share of $11.00. Each option granted to an Outside
Director will (i) have a ten-year term, (ii) have an exercise price equal to the
fair market value of a share of Common Stock on the date of grant and (iii)
become exercisable in cumulative annual increments of one-third of the total
number of shares of Common Stock subject thereto, beginning on the first
anniversary of the date of grant.
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors of the Company held three meetings during the fiscal
year ended December 31, 1997, and transacted business on three occasions during
the fiscal year by unanimous written consent.
The Board of Directors has an Audit Committee which, during the fiscal year
ended December 31, 1997, consisted of Messrs. Wojtek, Hamilton and Loyd. The
function of the Audit Committee is to meet with the internal financial staff of
the Company and the independent public accountants engaged by the Company to
review (i) the scope and findings of the annual audit, (ii) quarterly financial
statements, (iii) accounting policies and procedures and the Company's financial
reporting, and (iv) the internal controls employed by the Company. The Audit
Committee also recommends to the Board of Directors the independent public
accountants to be selected to audit the Company's annual financial statements,
and reviews the fees charged for audits and for any nonaudit engagements. The
Committee's findings and recommendations are reported to management and the
Board of Directors for appropriate action. The Audit Committee did not meet
during fiscal 1997.
The Board of Directors has a Compensation Committee which consists of
Messrs. Webster, Hamilton and Loyd whose function is to consider and act upon
management's recommendations to the Board of Directors on salaries, bonuses and
other forms of compensation for the Company's executive officers and certain
other key employees. The Compensation Committee has been appointed by the Board
of Directors to administer the Company's stock option plans. The Compensation
Committee held one meeting and transacted business by unanimous written consent
on one occasion during fiscal 1997.
The Board of Directors does not have a standing Nominating Committee.
During the fiscal year ended December 31, 1997, 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.
SECTION 16(A) REPORTING DELINQUENCIES
Section 16(a) of the Exchange Act requires that the Company's executive
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, file reports of ownership
and changes of ownership with the Securities and Exchange Commission (the
"SEC"). Officers, directors and greater than ten percent 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, 1997, 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.
5
<PAGE> 9
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the annual, long-term and total compensation
for the Company's (i) Chief Executive Officer for the fiscal years ended
December 31, 1997 and 1996 and (ii) its other three executive officers
(collectively, the "Named Executives") for the fiscal year ended December 31,
1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------- ------------
OTHER ANNUAL STOCK ALL OTHER
NAME AND YEAR SALARY($) BONUS($) COMPENSATION($)(1) OPTIONS(#) COMPENSATION($)(2)
PRINCIPA ---- --------- -------- ------------------ ------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
S. P. Johnson IV 1997 $187,500 $ 500 -- 100,000 $3,000
President and Chief
Executive Officer 1996 $180,000 -- -- -- --
Frank A. Wojtek 1997 $ 56,250 $ 500 -- 40,000 $ 750
Chief Financial
Officer, Vice
President,
Secretary and
Treasurer
George Canjar 1997 $132,000 $4,500 -- 138,825(3) $2,430
Vice President of
Exploration
Development
Kendall A. Trahan 1997 $109,471 $ 500 -- 83,295(3) $1,350
Vice President of
Land
</TABLE>
- ---------------
(1) For the fiscal years 1996 and 1997, the Named Executives did not receive any
annual compensation not properly categorized as salary or bonus, except for
certain perquisites and other personal benefits which are not shown because
the aggregate amount of such compensation, if any, for each Named Executive
during each of those fiscal years did not exceed the lesser of $50,000 or
10% or total salary and bonus reported for that Named Executive.
(2) For the fiscal year 1997, all other compensation consists of contributions
of $3,000, $750, $2,430 and $1,350 by the Company under its 401(k) Plan for
Mr. Johnson, Mr. Wojtek, Mr. Canjar and Mr. Trahan, respectively.
(3) As adjusted for the 521-for-1 stock split that occurred on June 5, 1997.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning Options/SAYS
granted during fiscal 1997 to the Named Executives:
<TABLE>
<CAPTION>
INDIVIDUAL
GRANTS POTENTIAL REALIZABLE
------------ VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS/SAYS EXERCISE PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM(2)
OPTIONS/SAYS EMPLOYEES IN PRICE -----------------------
GRANTED(#) FISCAL YEAR ($/SHARE)(1) EXPIRATION DATE 5%($) 10%($)
----------- ------------ ------------ --------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
S. P. Johnson IV....... 100,000 22.6% $11.00 08/11/07 692,000 1,753,000
Frank A. Wojtek........ 40,000 9.0% $11.00 08/11/07 276,800 701,200
George Canjar.......... 138,825(3) 31.4% $ 3.60(3) 08/01/07 314,302 796,856
Kendall A. Trahan...... 83,295(3) 18.8% $ 3.60(3) 03/01/08 213,235 555,578
</TABLE>
- ---------------
(1) The exercise price of the options granted is equal to the market value of
the Company's Common Stock on the date of grant.
6
<PAGE> 10
(2) Potential realizable value of each grant assumes that the market price of
the underlying security (based upon the value of the Common Stock on the
date of grant) appreciates at annualized rates of 5% and 10% over the term
of the award. Actual gains, if any, on stock option exercises are dependent
on the future performance of Common Stock and overall market conditions.
There can be no assurance that the amounts reflected on this table will be
achieved.
(3) As adjusted for the 521-for-1 stock split that occurred on June 5, 1997.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to the unexercised
options to purchase the Common Stock held by the Named Executives at December
31, 1997. None of the Named Executives exercised any stock options during the
fiscal year ended December 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT OPTIONS AT
ACQUIRED VALUE FISCAL YEAR-END FISCAL YEAR-END($)(2)
ON REALIZED ---------------------------- ----------------------------
EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
S. P. Johnson IV..... -- -- -- 100,000 -- --
Frank A. Wojtek...... -- -- -- 40,000 -- --
George Canjar........ -- -- 83,295 55,530 355,948 237,299
Kendall A. Trahan.... -- -- 33,318 49,977 142,379 213,569
</TABLE>
- ---------------
(1) Value realized is calculated based on the difference between the option
exercise price and the closing market price of the Company's Common Stock on
the date of exercise, multiplied by the number of shares underlying the
options.
(2) Value of unexercised in-the-money options is calculated based upon the
difference between the option price and the closing price of the Company's
Common Stock at fiscal year-end, multiplied by the number of shares
underlying the options. The closing price of the Company's Common Stock, as
reported on the NASDAQ Stock Market on December 31, 1997 was $7.875.
CERTAIN TRANSACTIONS
The Combination Transactions
Prior to the close of its initial public offering, the Company conducted
its operations through a number of affiliated entities that were combined in a
series of transactions (the "Combination Transactions") at the time of the
closing of the Company's initial public offering (the "IPO"). Prior to
completion of the IPO, the shareholders of the Company were Steven A. Webster,
S.P. Johnson IV, Frank A. Wojtek, Douglas A.P. Hamilton and Paul B. Loyd, Jr.
(the "Founders"), each of whom is an officer and/or a director of the Company,
Cerrito Partners, a partnership of which Mr. Webster is a general partner, and
DAPHAM Partnership L.P., the limited partner of which is a charitable remainder
trust of which the beneficiaries include Mr. Hamilton and his wife and children.
Carrizo Production, Inc. was a corporation that was owned by the Founders. The
officers and directors of the Company also served in the same capacity for
Carrizo Production, Inc. Carrizo Production, Inc. was the general partner of and
held a 1.42% before payout/28.82% after payout interest in Encinitas Partners
Ltd. The remaining partnership interests in Encinitas Partners Ltd. were held by
limited partners, including the Founders. The Company held a 50% general partner
interest in La Rosa Partners Ltd. The remaining 50% interest in La Rosa Partners
Ltd. was held by the Founders (other than Mr. Wojtek) as limited partners. The
Company was the general partner and held a 13.33% before payout/ 31.67% after
payout interest in Carrizo Partners Ltd.; the remaining partnership interests in
Carrizo Partners Ltd. were held by limited partner investors that included S.P.
Johnson IV who, as a special limited partner, was entitled to a 0.001% prepayout
and 25% after payout interest. The Company owned a 50% general partner interest
in Placedo Partners Ltd., and Carrizo Partners Ltd. held the remaining 50%
limited partner interest in Placedo Partners Ltd. Encinitas Partners Ltd. owned
the Company's interest in the Encinitas/Kelsey Project, the Midway Project and
the East McFaddin Project. Carrizo Partners Ltd. owned the Company's interest in
7
<PAGE> 11
the Camp Hill Project as well as a 50% interest in Placedo Partners Ltd. La Rosa
Partners Ltd. owned the Company's interest in the La Rosa Project. Placedo
Partners Ltd. owned an interest in the Placedo Project. Carrizo Production, Inc.
owned the general partner interest in Encinitas Partners Ltd. All of the
Company's other assets were owned by the Company. The operations of all of these
entities were managed through the same management team.
The Combination Transactions included the following: (i) Carrizo
Production, Inc. merged into the Company (the "Carrizo Production Merger"), and
the outstanding shares of capital stock of Carrizo Production, Inc. converted
into an aggregate of 343,000 shares of Common Stock; (ii) the Company acquired
Encinitas Partners Ltd. in two steps: (a) the Company acquired the Founder's
limited partner interests in Encinitas Partners Ltd. for an aggregate
consideration of 468,533 shares of Common Stock (the "Founder's Purchase
Transaction") and (b) Encinitas Partners Ltd. merged into the Company (the
"Encinitas Merger"), and the outstanding partnership interests in Encinitas
Partners Ltd. converted into an aggregate of 860,699 shares of Common Stock;
(iii) La Rosa Partners Ltd. merged into the Company (the "La Rosa Merger"), and
the outstanding partnership interests in La Rosa Partners Ltd. converted into an
aggregate of 48,700 shares of Common Stock; and (iv) Carrizo Partners Ltd.
merged into the Company (the "Carrizo Partners Merger"), and the outstanding
partnership interests in Carrizo Partners Ltd. converted into an aggregate of
569,068 shares of Common Stock. As a result of the Carrizo Partners Merger, the
Company will own all of the partnership interests in Placedo Partners Ltd. Each
of the Combination Transactions closed concurrently with the closing of the IPO.
The determination of the number of shares of Common Stock that were issued to
the various parties in the Combination Transactions was made by management of
the Company based upon the following four valuation criteria for the assets
attributable to each party: (i) PV-10 Values of proved reserves; (ii) estimates
of discounted net asset values that gave effect to all assets (rather than
proved reserves only) for all of management's then proposed projects; (iii)
projected 1997 cash flows; and (iv) projected 1998 cash flows.
An aggregate of 2,290,000 shares of Common Stock were issued in connection
with the Combination Transactions. Mr. Webster received 77,175 shares of Common
Stock in the Carrizo Production Merger, 132,721 shares of Common Stock in the
Founder's Purchase Transaction and 14,610 shares of Common Stock in the La Rosa
Merger, and Cerrito Partners, of which Mr. Webster is a general partner,
received 31,127 shares of Common Stock in the Encinitas Merger. Mr. Johnson
received 34,300 shares of Common Stock in the Carrizo Production Merger, 46,075
shares of Common Stock in the Founder's Purchase Transaction, 4,870 shares of
Common Stock in the La Rosa Merger and 176,840 shares of Common Stock in the
Carrizo Partners Merger. Mr. Wojtek received 77,175 shares of Common Stock in
the Carrizo Production Merger and 24,296 shares of Common Stock in the Founder's
Purchase Transaction. Mr. Hamilton received 77,175 shares of Common Stock in the
Carrizo Production Merger, 132,721 shares of Common Stock in the Founder's
Purchase Transaction and 14,610 shares of Common Stock in the La Rosa Merger.
Mr. Loyd received 77,175 shares of Common Stock in the Carrizo Production
Merger, 132,721 shares of Common Stock in the Founder's Purchase Transaction and
14,610 shares of Common Stock in the La Rosa Merger. Mr. Marsella received
105,602 shares of Common Stock in the Carrizo Partners Merger and 85,599 shares
of Common Stock in the Encinitas Merger.
Master Technical Services Agreement
In August 1996, the Company entered into the Master Technical Services
Agreement (the "MTS Agreement") with Reading & Bates Development Co. ("R&B
Development"), which was a subsidiary of Reading & Bates and is now a subsidiary
of R&B Falcon. Paul B. Loyd, Jr., a director of the Company, was the Chairman of
the Board, Chief Executive Officer and President and a director of Reading &
Bates and is currently the Chairman of R&B Falcon. Steven A. Webster is the
Chief Executive Officer and President of R&B Falcon. Under the MTS Agreement,
the Company provides certain engineering and technical services to R&B
Development in connection with R&B Development's technical service, procurement
and construction projects in offshore drilling and floating production, and the
Company is paid an amount generally equal to the
8
<PAGE> 12
salaries of its personnel that provide such services, pro rata based on the
amount of time that is spent providing such services. The Company was paid
$117,726 for services provided during 1997 under the MTS Agreement and expects
to continue to perform services under the contract. The MTS Agreement may
generally be terminated by either party upon five days prior written notice to
the other party.
Amounts Paid by the Company to Certain Officers and Directors
Between December 1993 and December 1996, the Company issued promissory
notes to certain officers and directors of the Company in consideration of funds
advanced to the Company by such officers and directors to assist the Company in
its operations. The Company borrowed $1.8 million from Douglas A. P. Hamilton on
May 31, 1997. The Company used the proceeds of this loan to make principal
repayment on such promissory notes in the amount of $600,000 to each of Messrs.
Loyd and Wojtek on May 31, 1997 and to Mr. Webster on June 3, 1997. The
remaining amounts outstanding under such promissory notes was paid in full out
of the proceeds of the IPO as was the May 1997 note to Mr. Hamilton. The total
principal amount paid on such promissory notes was $115,916 to Paul B. Loyd,
Jr.; $115,916 to Steven A. Webster; $59,250 to Frank A. Wojtek and $2,515,916 to
Douglas A. P. Hamilton. The amounts paid on such promissory notes, including
accrued interest, were as follows: $201,980 to Paul B. Loyd, Jr.; $199,461 to
Steven A. Webster; $134,920 to Frank A. Wojtek and $2,642,487 to Douglas A. P.
Hamilton.
In addition, between February 1997 and March 1997, La Rosa Partners, Ltd.
issued promissory notes in favor of certain officers and directors of the
Company, in consideration of funds advanced to La Rosa Partners, Ltd. by such
officers and directors to assist La Rosa Partners, Ltd. in its operations. Each
of such promissory notes was paid in full out of the proceeds of the IPO. The
total principal amount paid on such promissory notes was $30,000 to Paul B.
Loyd, Jr.; $30,000 to Steven A. Webster; $15,000 to Frank A. Wojtek and $30,000
to Douglas A. P. Hamilton. The amount paid on such promissory notes, including
accrued interest, were as follows: $31,127 to Paul B. Loyd, Jr.; $31,194 to
Steven A. Webster; $15,560 to Frank A. Wojtek and $31,175 to Douglas A. P.
Hamilton.
Financial/Accounting Services Agreement
In March 1994, the Company entered into the Financial/Accounting Services
Agreement (the "Services Agreement"), effective as of December 1, 1993, with
Loyd & Associates, Inc. ("Loyd & Associates"), a private financial consulting
and investment banking firm. Paul B. Loyd, Jr. serves as President and owns
92.5% of the stock of Loyd & Associates, and Frank A. Wojtek serves as Vice
President and Secretary/Treasurer and owns 7.5% of the stock of Loyd &
Associates. Under the Services Agreement, Loyd & Associates provided, on an
as-needed basis and at market rates, financial consulting, accounting and
administrative services to the Company, Carrizo Partners Ltd. and Placedo
Partners Ltd. The Services Agreement also provided for reimbursement to Loyd &
Associates of certain expenses. Total payments for services rendered were
$38,113 in 1997. The Services Agreement terminated at the closing of the IPO.
Agreements with the Company's Current Shareholders
During 1997, the Company entered into tax indemnification agreements with
the Founders that provide for, among other things, the indemnification of the
Founders for any losses or liabilities with respect to any additional taxes
(including interest, penalties and legal fees) resulting from the Company's and
Carrizo Production, Inc.'s operations during the period in which each was an S
Corporation. Also during 1997, the Company entered into a registration rights
agreement with the Founders and DAPHAM Partnership, L.P. that, among other
things, grants to such persons three demand registrations and three additional
demand registrations for certain offerings registered on SEC Form S-3, as well
as certain piggy-back registration rights for other registrations effected by
the Company.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation programs are designed to attract and
retain highly qualified executives and to motivate them to maximize shareholder
returns. The Company's executive compensation
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<PAGE> 13
program is intended to provide competitive compensation levels and incentive pay
levels that vary based on corporate and individual performance.
There are three basic components to the Company's current compensation
system: base pay; annual incentive compensation in the form of a cash bonus; and
long-term equity-based incentive compensation. Each component is addressed in
the context of individual and Company performance and competitive conditions. In
determining competitive compensation levels, the Company analyzes data that
includes information regarding the general oil and natural gas exploration and
production industry.
Actual individual awards and changes in remuneration to the individual
executives are determined by the Compensation Committee. The Chief Executive
Officer works with the Compensation Committee in the design of the plans and
makes recommendations to the Committee regarding the salaries and bonuses of
Company employees that report directly to him. Grants or awards of stock,
including stock options, are individually determined and administered by the
Compensation Committee.
Base Pay. Base pay is designed to be competitive with salary levels for
comparable executive positions at other oil and natural gas exploration and
production companies and the Compensation Committee reviews such comparable
salary information as one factor to be considered in determining the base pay
for the Company's executive officers. Other factors the Compensation Committee
considers in determining base pay for each of the executive officers are that
officer's responsibilities, experience, leadership, potential future
contribution, and demonstrated individual performance. The types and relative
importance of specific financial and other business objectives vary among the
Company's executives depending on their positions and the particular operations
and functions for which they are responsible. The Compensation Committee also
considers the Company's earnings levels and progress in implementing its
business strategy in establishing base salary increases for executives. The
employment contracts of the executive officers provide that base pay is to be
reviewed at least annually and shall be increased at any time and from time to
time, and that any increase shall be substantially consistent with increases in
base salary generally awarded in the ordinary course of business to executives
of the Company. The salaries of Messrs. Johnson and Canjar were adjusted on
October 1, 1997 to take into account the length of their full-time employment
with the Company.
Annual Bonus. The annual bonus is determined by the Compensation Committee.
The employment contracts with the executive officers contemplate annual bonus
awards in an amount comparable to the annual bonus of other Company executives,
taking into account the individual's position and responsibilities. In addition,
Mr. Canjar receives certain overriding royalty interests on prospects he
generates as a further incentive in his role as Vice President of Exploration
Development. The Compensation Committee determined that, for 1997, it was their
preference to compensate the executive officers primarily in the form of long-
term equity-based compensation i.e. with stock options rather than cash bonuses.
Therefore, the only bonuses awarded the executives were de minimis cash awards
as were awarded to all full time employees of the Company. Additionally, Mr.
Canjar was awarded a $4,000 bonus related to 1996 that was paid in early 1997.
Long-Term Equity-Based Compensation. To date, the Company has relied
primarily upon stock option awards to provide long-term incentives for
executives. Prior to the Company's IPO, the shareholders and the Board of
Directors of the Company approved the Company's Incentive Plan. The objectives
of the Incentive Plan are to (i) attract and retain the services of key
employees, qualified independent directors and qualified consultants and other
independent contractors and (ii) encourage a sense of proprietorship in and
stimulate the active interest of those persons in the development and financial
success of the Company by making awards designed to provide participants in the
Incentive Plan with proprietary interest in the growth and performance of the
Company. Long-term equity-based compensation is tied to shareholder return.
Under the Company's Incentive Plan, long-term incentive compensation
consists of stock options, which generally have a ten-year term and vest in
thirty-three percent increments in each of the three years following the date of
the grant. The exercise price of stock options granted is equal to the fair
market value of the Common Stock on the date of grant; accordingly, executives
receiving stock options are rewarded only if the market price of the Common
Stock appreciates. Stock options are thus designed to align the interests of the
Company's executives with those of its shareholders by encouraging executives to
enhance the value of the Company and, hence, the price of the Common Stock and
each shareholder's return.
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<PAGE> 14
In 1996 and 1997, the Company granted 138,825 and 83,295 options to Messrs.
Canjar and Trahan, respectively, as set forth in the table captioned "Option/SAR
Grants in the Last Fiscal Year" contained in this proxy statement. These options
vest according to a two-year vesting schedule. The Company made these grants in
order to induce these two executives to accept employment with the Company and
to provide the employees with incentives to work towards the Company's success.
Subsequent to the closing of its IPO, the Company granted a total of 220,000
options to key employees, including a total of 140,000 options granted to
Messrs. Johnson and Wojtek, as set forth in the table captioned "Option/SAR
Grants in the Last Fiscal Year" contained in this proxy statement. Those options
vest at a rate of 33 1/3% per year, with the first 33 1/3% vesting on August 11,
1998.
The Company may periodically grant new options to provide continuing
incentive for future performance. In making the decision to grant additional
options, the Compensation Committee would expect to consider factors such as the
size of previous grants and the number of options held. In determining whether
to grant executive officers stock options under the Plan, the Compensation
Committee considers factors, including that executive's current ownership stake
in the Company, the degree to which increasing that ownership stake would
provide the executive with additional incentives for future performance, the
likelihood that the grant of those options would encourage the executive to
remain with the Company and the value of the executive's service to the Company.
Compensation of the Chief Executive Officer. The Compensation Committee
based the compensation of the Company's Chief Executive Officer, Mr. Johnson, on
the same considerations described above for other executive officers. The
Compensation Committee increased Mr. Johnson's base salary on October 1, 1997 to
take into account the length of his full-time employment with the Company. For
the reasons discussed above with respect to all executive officers, Mr. Johnson
received the same year-end cash bonus as all other executive officers of the
Company.
Concurrently with the Company's IPO, Mr. Johnson was granted options to
purchase 100,000 shares of Common Stock at an exercise price of $11.00 per
share. The Compensation Committee believes the size of this initial award was
consistent with grants made to other personnel and was appropriate given Mr.
Johnson's significant efforts in connection with the founding and development of
the Company.
Executive compensation is an evolving field. The Compensation Committee
monitors trends in this area, as well as changes in law, regulation and
accounting practices, that may affect either its compensation practices or its
philosophy. Accordingly, the Committee reserves the right to alter its approach
in response to changing conditions.
The Compensation Committee
Steven A. Webster
Douglas A.P. Hamilton
Paul B. Loyd, Jr.
SECTION 162(m) OF THE INTERNAL REVENUE CODE.
Section 162(m) of the Internal Revenue Code of 1986, as amended, generally
limits (to $1 million per covered executive) the deductibility for federal
income tax purposes of annual compensation paid to a company's chief executive
officer and each of its other four most highly compensated executed officers.
All options granted under the Company's Incentive Plan in fiscal year 1997 will
qualify for an exemption from the application of Section 162(m) of the Code,
thereby preserving the deductibility for federal income tax purposes of
compensation that may be attributable to the exercise of such options.
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<PAGE> 15
EMPLOYMENT ARRANGEMENTS
The Company has entered into employment agreements with each executive
officer listed below. The following chart shows the current annual base salaries
that the executive officers listed therein will be paid by the Company.
<TABLE>
<CAPTION>
NAME AND CURRENT POSITION ANNUAL SALARY
- ------------------------- -------------
<S> <C>
S. P. Johnson IV............................................ $210,000
President and Chief Executive Officer
Frank A. Wojtek............................................. $150,000
Chief Financial Officer
Kendall A. Trahan........................................... $135,000
Vice President of Land
George Canjar............................................... $150,000
Vice President of Exploration & Development
</TABLE>
Prior to the completion of the IPO, the Company entered into employment
agreements with each of Mr. S. P. Johnson IV and Mr. Frank A. Wojtek which
provides for an annual base salary, as adjusted October 1, 1997, in an amount
not less than $210,000 (previously $180,000) in the case of Mr. Johnson and
$150,000 in the case of Mr. Wojtek.
The Company and Mr. Kendall A. Trahan have entered into an employment
agreement pursuant to which Mr. Trahan serves as the Company's Vice President of
Land and which provides for an annual base salary in an amount not less than
$135,000. The agreement continues and revises a previously granted stock option,
such that he has the option to purchase up to 83,295 shares of the Company's
Common Stock at an aggregate exercise price of $300,000. These options vest
according to a two-year vesting schedule.
The Company and Mr. George Canjar have entered into an employment
agreement, pursuant to which Mr. Canjar serves as the Company's Manager of
Exploration Development and which provides for an annual base salary, as
adjusted October 1, 1997, in an amount not less than $150,000 (previously
$126,000). The agreement includes a provision that entitles Mr. Canjar to an
undivided 0.5% overriding royalty interest, proportionately reduced to the
Company's working interest, in all oil, gas and other minerals that may be
produced and saved from prospects generated by Mr. Canjar. The agreement
continues and revises a previously granted stock option, such that he has the
option to purchase up to 138,825 shares of the Company's Common Stock at an
aggregate exercise price of $500,000. These options vest according to a two-
year vesting schedule.
Each of the employment agreements of Mr. Johnson, Mr. Wojtek, Mr. Trahan
and Mr. Canjar has an initial three-year term provided that at the end of the
second year of such initial term and on every day thereafter, the term of each
such employment agreement will automatically be extended for one day, such that
the remaining term of the agreement shall never be less than one year. Under
each agreement, both the Company and the employee may terminate the employee's
employment at any time. Upon termination of employment on account of disability
or if employment is terminated by the Company for any reason (except under
certain limited circumstances defined as "for cause" in the agreement), or if
employment is terminated either (x) by the employee subsequent to a change of
control (as defined and including certain terminations prior to a change of
control if caused by a person involved in precipitating a change of control) or
(y) by reason of death during a sixty day period following the elapse of one
year after such a change of control ("window period") or with good reason (as
defined), under the agreement the employee will generally be entitled to (i) an
immediate lump sum cash payment equal to 150% (375% if termination occurs after
a change of control) of his annual base salary that would have been payable for
the remainder of the term of the applicable agreement discounted at 6%, (ii)
continued participation in all the Company's welfare benefit plans and continued
life insurance and medical benefits coverage and (iii) the immediate vesting of
any stock options or restricted stock previously granted to such employee and
outstanding as of the time immediately prior to the date of his termination, or
a cash payment in lieu thereof. If employment terminates due to death
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<PAGE> 16
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. 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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In June 1997, the Company established the Compensation Committee of the
Board of Directors, comprised of Messrs. Webster, Hamilton and Loyd. In the
past, matters with respect to the compensation of executive officers of the
Company were determined by the nonemployee members of the Board of Directors as
a whole.
Messrs. Webster, Hamilton and Loyd are among the founders of the Company,
and are parties to certain transactions involving the Company. For a description
of such transactions, see "Certain Transactions."
13
<PAGE> 17
PERFORMANCE GRAPH
The following graph presents a comparison of the yearly percentage change
in the cumulative total return on the Common Stock over the period from August
6, 1997, the date of the Company's initial public offering, to December 31,
1997, with the cumulative total return of the S&P 500 Index and of the American
Stock Exchange Natural Resource Industry Index of publicly traded companies over
the same period. The graph assumes that $100 was invested on August 6, 1997 in
the Common Stock at its initial public offering price of $11.00 per share and in
each of the other two indices and the reinvestment of all dividends, if any.
The graph is presented in accordance with SEC requirements. Shareholders
are cautioned against drawing any conclusions from the data contained therein,
as past results are not necessarily indicative of future financial performance.
COMPARISON OF CUMULATIVE TOTAL RETURN*
AMONG CARRIZO OIL & GAS, INC., THE S&P
500 INDEX AND THE AMERICAN STOCK
EXCHANGE NATURAL RESOURCE
INDUSTRY INDEX
<TABLE>
<CAPTION>
AMEX
MEASUREMENT PERIOD NATURAL CARRIZO
(FISCAL YEAR COVERED) S & P 500 RESOURCES OIL & GAS
<S> <C> <C> <C>
8/6/97 100 100 100
12/31/97 101 91 72
</TABLE>
* $100 Invested on August 6, 1997 in Stock or Index (Including Reinvestment of
Dividends).
PROPOSAL 2
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed, and recommends the approval of the
appointment of, Arthur Andersen LLP, who have been the Company's auditors since
1997, as independent public accountants for the fiscal year ending December 31,
1998. Representatives of Arthur Andersen LLP are expected to be present at the
Annual Meeting and will be given the opportunity to make a statement, if they
desire to do so, and to respond to appropriate questions.
Unless shareholders specify otherwise in the proxy, proxies solicited by
the Board of Directors will be voted by the persons named in the proxy at the
Annual Meeting to ratify the selection of Arthur Andersen
14
<PAGE> 18
LLP as the Company's auditors for 1998. The affirmative vote of a majority of
the votes cast at the Annual Meeting will be required for ratification.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP.
OTHER BUSINESS
As of the date of this proxy, 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
Shareholders' proposals intended to be presented at the 1999 Annual Meeting
must be received by the Company no later than December 22, 1998 for inclusion on
the Company's proxy statement and form of proxy for that meeting. Shareholder
proposals must also be otherwise eligible for inclusion.
By Order of the Board of Directors
/s/ FRANK A. WOJTEK
Frank A. Wojtek,
Secretary
Dated: April 21, 1998
Houston, Texas
15
<PAGE> 19
<TABLE>
<S> <C>
======================================================================================
CARRIZO OIL & GAS, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
P FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
MAY 20, 1998
R The undersigned hereby appoints S.P. Johnson IV and Frank A. Wojtek,
jointly and severally, proxies, with full power of substitution and with
discretionary authority, to vote all shares of Common Stock that the
O undersigned is entitled to vote at the Annual Meeting of Shareholders of
Carrizo Oil & Gas, Inc. (the "Company") to be held on Wednesday, May 20,
1998, at the Houston Marriott Westside, 13210 Katy Freeway, Houston,
X Texas, at 10:00 a.m., or at any adjournment thereof, hereby revoking any
proxy heretofore given.
Y THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN. IN THE ABSENCE OF SPECIFIC DIRECTIONS TO THE CONTRARY, THIS
PROXY WILL BE VOTED FOR THE ELECTION OF EACH OF THE DIRECTORS NAMED
BELOW AND FOR THE APPROVAL OF ARTHUR ANDERSEN LLP AS THE COMPANY'S
ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1998.
The undersigned hereby acknowledges receipt of the Notice of, and
Proxy Statement for, the aforesaid Annual Meeting.
1. ELECTION OF DIRECTORS, NOMINEES:
S.P. Johnson IV; Frank A. Wojtek; Steven A. Webster; Douglas A.P.
Hamilton; Paul B. Loyd, Jr.; and Roberto Marsella as directors, except
as indicated below; or
[ ] FOR [ ] WITHHELD
For, except vote withheld from the following nominee(s):
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
======================================================================================
</TABLE>
<PAGE> 20
2. APPROVAL OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER
31, 1998:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. With discretionary authority as to such other matters as may
properly come before the meeting.
Date: , 1998
----------------------
---------------------------------
(Signature)
---------------------------------
(Signature)
Sign exactly as name appears
hereon.
(Joint owners should each
sign. When signing as
attorney, executor, officer,
administrator, trustee, or
guardian, please give full
title as such.)
PLEASE SIGN, DATE AND RETURN
THE PROXY CARD PROMPTLY,
USING THE ENCLOSED ENVELOPE.
