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OMB APPROVAL |
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OMB Number:
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3235-0059 |
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Expires:
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January 31, 2008 |
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14. |
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. )
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Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box: |
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o Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)) |
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þ Definitive Proxy Statement |
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o Definitive Additional Materials |
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Soliciting Material Pursuant to §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):
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þ No fee required. |
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o
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11. |
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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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o Fee paid previously with preliminary materials. |
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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. |
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1) Amount Previously Paid: |
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2) Form, Schedule or Registration Statement No.: |
April 25, 2007
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,
May 22, 2007, 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 Companys 2006 Annual Report to Shareholders
is also enclosed.
Sincerely,
S.P. Johnson IV
President and Chief Executive Officer
TABLE OF CONTENTS
CARRIZO
OIL & GAS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 22,
2007
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 Tuesday,
May 22, 2007, at 9:00 a.m. for the following purposes:
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(1)
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to elect seven members to the Board of Directors for the ensuing
year;
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(2)
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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, 2007; and
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(3)
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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 24,
2007, 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
Paul F. Boling
Secretary
April 25, 2007
1000 Louisiana Street, Suite 1500
Houston, TX 77002
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 2007 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 Tuesday, May 22, 2007,
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 April 30, 2007. 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 24, 2007, 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 26,001,692 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
appointment of Pannell Kerr Forster of Texas, P.C.
(PKF) as the Companys independent registered
public accounting firm for the fiscal year ending
December 31, 2007; 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 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 (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, 2006,
and (2) the shares of Common Stock beneficially owned as of
March 31, 2007 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 31, 2007, the Company had
25,991,131 shares of Common Stock issued and outstanding.
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Amount and Nature of
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Beneficial Ownership
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Percent
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of Common
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Number of
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Stock
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Name and Address of Beneficial Owner(1)
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Shares(2)
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(rounded)
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Directors and Executive Officers:
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S. P. Johnson IV
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778,535
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3.0
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%
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Paul F. Boling
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73,310
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*
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Gregory E. Evans
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44,837
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*
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J. Bradley Fisher
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59,850
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*
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Richard H. Smith
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15,000
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*
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Steven A. Webster
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2,586,045
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9.8
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%
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Thomas L. Carter, Jr.
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11,292
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*
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Paul B. Loyd, Jr.
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172,490
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*
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F. Gardner Parker
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94,167
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*
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Roger A. Ramsey
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24,333
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*
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Frank A. Wojtek
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163,125
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*
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Executive Officers and Directors
as a Group (11 persons)
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4,022,985
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15.1
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%
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Advisory Research, Inc.(3)
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2,170,727
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8.4
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%
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Centennial Energy Partners,
L.L.C.(4)
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1,372,631
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5.3
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%
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Neuberger Berman Inc.(5)
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2,064,427
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7.9
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%
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Less than 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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The table includes shares of Common Stock that can be acquired
through the exercise of options within 60 days of
March 31, 2007 as follows: Mr. Johnson
231,112, Mr. Boling 39,000,
Mr. Evans 13,333, Mr. Fisher
15,000, Mr. Smith none,
Mr. Webster 281,389,
Mr. Carter 6,667, Mr. Loyd
28,000, Mr. Parker 54,167,
Mr. Ramsey 12,333, Mr. Wojtek
1,667, and all executive officers and directors as a
group 682,668. 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. The table excludes shares of Common Stock subject to
options that cannot be exercised within 60 days of
March 31, 2007 as follows: Mr. Johnson
5,556, Mr. Boling none,
Mr. Evans 6,667, Mr. Fisher
none, Mr. Smith none,
Mr. Webster 4,445, Mr. Carter
3,333, Mr. Loyd 1,500,
Mr. Parker 833, Mr. Ramsey
1,167, Mr. Wojtek 833, and all officers and
directors as a group 24,334. |
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Based solely on an amendment to Schedule 13G filed on
February 21, 2007, Advisory Research, Inc., an investment
advisor, reports sole dispositive power over
2,170,727 shares and voting power over
2,167,077 shares. The address of the principal business
office of Advisory Research, Inc. is 180 North Stetson Street,
Suite 5500, Chicago, Illinois 60601. |
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(4) |
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Based solely on a Schedule 13G filed on February 13,
2007, Centennial Energy Partners, L.L.C. reported shared voting
power and shared dispositive power over 2,047,300 shares.
Peter K. Seldin, the managing member of Centennial Energy
Partners, L.L.C., also reported shared voting power and shared
dispositive power over 2,047,300 shares. Mr. Seldin
has the power to vote and dispose of the shares beneficially
owned by Centennial Energy Partners, L.L.C. Neither Centennial
Energy Partners, L.L.C. nor Mr. Seldin owns any shares
directly. Centennial Energy Partners, L.P. reported shared
voting power and shared dispositive power over
1,372,631 shares that it holds directly. The address of the
principal business office of these entities is 575 Lexington
Avenue, 33rd Floor, New York, New York 10022. |
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Based solely on a Schedule 13G filed on February 13,
2007, Neuberger Berman Inc. reported shared voting power over
1,684,927 shares and shared dispositive power over
2,064,427 shares. Neuberger Berman, LLC also reported
shared voting power over 1,684,927 shares and shared
dispositive power over 2,064,427 shares. Neuberger Berman
Management Inc. reported shared voting power over
1,684,927 shares and shared dispositive power over
1,684,927 shares. Neuberger Berman Equity Funds reported
shared voting power over 1,618,227 shares and shared
dispositive power over 1,618,227 shares. The address of the
principal business office of each of these entities is 605 Third
Avenue, New York, New York 10158. |
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 2008 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 nominees age as of
April 1, 2007, 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 51, 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).
Mr. Johnson is a Registered Petroleum Engineer and has a
B.S. in Mechanical Engineering from the University of Colorado.
Steven A. Webster, age 55, 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., and Hercules Offshore, Inc. (a offshore
drilling
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contractor), as well as various private companies. He is also a
trust manager of 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 55, 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 60, 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 65, 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) and
Hercules Offshore, 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 68, 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 51, 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.
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Committees
of the Board of Directors
The Board of Directors held four meetings during the fiscal year
ended December 31, 2006, and transacted business on ten
occasions during the fiscal year by unanimous written consent.
During 2006, 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 2006. A copy of the Nominating
Committee Charter may be found on the Companys 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).
Mr. Webster served on the Nominating Committee pursuant to
an exception provided under the Nasdaq rules until March 5,
2007. Under the Nasdaq rules, a non-independent member of the
Board of Directors may serve up to two years as a member of a
nominating committee under exceptional and limited circumstances
where such individuals membership is required by the best
interests of the Company and its shareholders. The Board of
Directors believes these criteria were met with respect to
Mr. Websters membership on the Nominating Committee
because of his extensive knowledge of the Company and the oil
and gas industry and because he is a major shareholder of the
Company.
The Board of Directors has an Audit Committee, which currently
consists of Messrs. Parker (chairman), Carter and Ramsey.
The Audit Committee held eight meetings during 2006. 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 Companys 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 nine meetings during 2006. 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 its duties under the incentive plan. In
February 2005, the
5
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. On October 24, 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 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 Companys bylaws, each potential
nominees 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 Committees 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
directors qualifications to continue on the Board in
connection with the selection of nominees to take office when
that directors term expires, and conducts a more detailed
review of each directors suitability to continue on the
Board following expirations of the directors term.
In addition, the Nominating Committees policy is that it
will consider candidates for the Board recommended by
shareholders. Any such recommendation should include the
candidates 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:
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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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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;
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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
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detailed information about any relationship or understanding
between the proposing shareholder and the candidate.
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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.
6
Director
Compensation
The table below contains information about the compensation
received by each of our non-employee directors during 2006. S.
P. Johnson IV, our President and Chief Executive Officer,
receives no extra pay for serving as a director.
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Fees Earned
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or Paid
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Stock
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Option
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All Other
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in Cash
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Awards
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Awards
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Compensation
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Total
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Name
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($)
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($)(1)
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($)(2)
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($)
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($)
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Steven A. Webster
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165,000
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(3)
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20,891
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53,734
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239,625
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Thomas L. Carter, Jr.
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32,000
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23,913
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25,333
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81,246
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Paul B. Loyd, Jr.
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15,000
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14,041
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7,770
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36,811
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F. Gardner Parker
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51,167
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45,525
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20,387
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117,079
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Roger A. Ramsey
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40,000
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31,868
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17,610
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89,478
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Frank A. Wojtek
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21,000
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9,105
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3,483
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33,588
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(1) |
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Represents the compensation cost recognized by us in 2006
related to restricted stock awards in accordance with Statement
of Financial Accounting Standards No. 123(R). As of
December 31, 2006, our directors held unvested restricted
shares in the following amounts: Webster 4,000,
Carter 2,500, Loyd 1,000,
Parker 5,000, Ramsey 3,500 and
Wojtek 1,000. |
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(2) |
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We did not grant any stock option awards in 2006. These amounts
represent the compensation cost recognized by us in 2006 related
to option awards in prior years, in accordance with Statement of
Financial Accounting Standards No. 123(R). As of
December 31, 2006, our directors held exercisable options
to purchase our ordinary shares in the following amounts:
Webster 281,390, Carter 3,333,
Loyd 28,000, Parker 52,500,
Ramsey 9,000 and Wojtek 1,667. As of
December 31, 2006, our directors held unexercisable options
to purchase our ordinary shares in the following amounts:
Webster 4,444, Carter 6,667,
Loyd 1,500, Parker 2,500,
Ramsey 4,500 and Wojtek 833. |
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(3) |
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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
2006-2007 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. Outside Director
compensation for the
2007-2008 director
term is currently expected to be the same as compensation for
the
2006-2007
term. 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
2006-2007 director
term and the
2007-2008 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
2006-2007 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 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.
7
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. Six of the Companys
directors attended the 2006 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 Companys website at www.crzo.net.
Section 16(a)
Reporting Compliance
Section 16(a) of the Exchange Act requires that the
Companys executive officers and directors, and persons who
own more than 10% of a registered class of the Companys
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
Companys officers and directors regarding their compliance
with the filing requirements, the Company believes that during
the fiscal year ended December 31, 2006, 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.
COMPENSATION
DISCUSSION AND ANALYSIS
Overview
This Compensation Discussion and Analysis covers the following
topics:
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our process of setting executive compensation;
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the philosophy and objectives of our executive compensation
program;
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the components of our executive compensation; and
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the tax deductibility of executive compensation.
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The
Executive Compensation Process
The
Compensation Committee
The Compensation Committees responsibilities, which are
more fully described in the Compensation Committees
charter, include each of the following:
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Annually reviewing and approving our general compensation
philosophy and overseeing the development and implementation of
our compensation programs.
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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 CEOs compensation level
based on this evaluation.
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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).
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Making recommendations to the Board with respect to our
long-term incentive plan.
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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.
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Compensation
Consultant
During 2006, 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 2007. 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, 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 Fergusons 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.
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
2006:
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Abraxas Petroleum Corporation
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ATP Oil & Gas Corporation
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Berry Petroleum Company
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Brigham Exploration Company
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Delta Natural Gas Company, Inc.
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Edge Petroleum Corporation
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Energy Partners, Ltd.
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Goodrich Petroleum Corporation
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Harken Energy Corporation
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Parallel Petroleum Corporation
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Penn Virginia Corporation
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9
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PetroQuest Energy, Inc.
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Range Resources Corporation
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Swift Energy Company
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The Meridian Resource Corporation
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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
Fergusons 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-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:
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base salary;
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annual bonus;
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long-term equity-based compensation;
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severance and change of control benefits; and
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perquisites and other benefits.
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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 officers 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
10
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 individuals 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. See Note 1 to the
Summary Compensation Table for more information on
the 2006 bonuses.
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 shareholders 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. 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
11
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 executives
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 executives 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.
In January 2006, we entered into amendments to the employment
agreements with Messrs. Johnson, Boling, Evans and Fisher.
These amendments, among other things, (1) created an
obligation on the part of the executive to provide notice to us
of the occurrence of an event that the executive considers
good reason under the agreement and provided us an
opportunity to cure such event; (2) reduced the duration of
the noncompete covenant in the agreement from two years to one
year and added a one year nonsolicitation covenant;
(3) provided that any dispute in connection with an
executives termination would be submitted to arbitration;
and (4) provided that we will only be required to pay the
executives attorneys fees, pending resolution of such a
dispute, if the termination occurred within two years after a
change of control or if the termination was involuntary, and
that we will only be required to pay the executives
severance payment, pending resolution of such a dispute, if the
termination occurred within two years after a change of control.
In addition, Mr. Fishers employment agreement was
amended to provide that, in the event his employment is
terminated without cause, for good reason or upon his death, he
will no longer be allowed to choose to receive a cash payment in
lieu of his outstanding equity compensation awards valued at the
highest price paid for a share of our common stock by specified
persons during the term of his employment or during the period
six months prior to the effective date of his employment
agreement. Mr. Evans employment agreement was also
amended to remove a provision giving us the option to cancel his
outstanding stock options and forfeit his outstanding shares of
restricted stock that would otherwise have vested on his
termination in the event he violates the noncompete covenant.
These amendments were designed to provide for terms that are
consistent with provisions that we currently believe are
necessary to meet our objective of retaining highly qualified
executives. As consideration for entering into these amendments
to their employment agreements, Mr. Boling, Mr. Evans
and Mr. Fisher received awards of 25,000, 25,000 and
35,000 shares of restricted stock, respectively. These
shares of restricted stock vest in full on the date
30 months following the grant date, in each case subject to
forfeiture upon the executives earlier departure from our
company.
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. Fishers
Other Compensation for
12
2006 included $7,039 of compensation from overriding royalty
interests and $8,941 of compensation from this
notional overriding royalty interest. 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 $1 million
per covered executive) the deductibility for federal income tax
purposes of compensation paid to certain executives, unless it
is performance-based compensation. The Compensation
Committee and the Board of Directors will take deductibility or
nondeductibility of compensation into account but have in the
past authorized, and will retain the discretion in the future to
authorize, the payment of potentially nondeductible amounts.
13
SUMMARY
COMPENSATION TABLE
The following table sets forth the compensation during 2006 of
the Companys Principal Executive Officer, the
Companys Principal Financial Officer and the three other
most highly compensated executive officers serving at
December 31, 2006 (collectively, the named executive
officers).
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All Other
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Stock
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Option
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Compensation
|
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Total
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Name and Principal Position
|
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Year
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|
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Salary ($)
|
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Bonus ($)(1)
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|
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Awards ($)(2)
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Awards ($)(3)
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($)(4)
|
|
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($)
|
|
|
S. P. Johnson IV
|
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2006
|
|
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313,958
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330,000
|
|
|
|
121,525
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|
|
58,364
|
|
|
|
10,022
|
|
|
|
833,969
|
|
President and Chief
Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul F. Boling
|
|
|
2006
|
|
|
|
188,239
|
|
|
|
140,400
|
|
|
|
301,291
|
|
|
|
44,142
|
|
|
|
6,250
|
|
|
|
680,322
|
|
Chief Financial Officer,
Vice President, Secretary
and Treasurer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Bradley Fisher
|
|
|
2006
|
|
|
|
245,907
|
|
|
|
216,000
|
|
|
|
405,609
|
|
|
|
11,410
|
|
|
|
23,677
|
|
|
|
902,603
|
|
Vice President and
Chief Operating Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregory E. Evans
|
|
|
2006
|
|
|
|
185,770
|
|
|
|
152,000
|
|
|
|
288,475
|
|
|
|
48,327
|
|
|
|
6,176
|
|
|
|
680,748
|
|
Vice President of
Exploration
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard H. Smith(5)
|
|
|
2006
|
|
|
|
66,916
|
|
|
|
36,440
|
|
|
|
31,825
|
|
|
|
0
|
|
|
|
158
|
|
|
|
135,339
|
|
Vice President of Land
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The amount shown includes amounts earned with respect to 2006
but paid in the second quarter of 2007. |
|
(2) |
|
Represents the compensation cost recognized by us in 2006
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, 2006. See Grants of
Plan-Based Awards Table for information on awards of
restricted stock that we granted in 2006. |
|
(3) |
|
We did not grant any stock option awards in 2006. These amounts
represent the compensation cost recognized by us in 2006 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, 2006. |
|
(4) |
|
The amounts shown as All Other Compensation for the
named executive officers include the following: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Johnson
|
|
|
Mr. Boling
|
|
|
Mr. Fisher
|
|
|
Mr. Evans
|
|
|
Mr. Smith
|
|
|
Matching contributions under the
401(K) Plan
|
|
$
|
9,377
|
|
|
$
|
5,605
|
|
|
$
|
7,052
|
|
|
$
|
5,531
|
|
|
$
|
|
|
Life insurance premium
|
|
|
645
|
|
|
|
645
|
|
|
|
645
|
|
|
|
645
|
|
|
|
158
|
|
Overriding royalties
|
|
|
|
|
|
|
|
|
|
|
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. |
14
GRANTS OF
PLAN-BASED AWARDS
The table below contains information with respect to plan-based
awards to the named executive officers during 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Stock
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Grant Date
|
|
|
|
|
|
|
Number of
|
|
|
Fair Value
|
|
|
|
|
|
|
Shares of
|
|
|
of Stock
|
|
|
|
|
|
|
Stock or
|
|
|
Awards
|
|
Name
|
|
Grant Date
|
|
|
Units (#)
|
|
|
($/Sh)(1)
|
|
|
S. P. Johnson IV
|
|
|
5/23/06
|
|
|
|
15,000
|
|
|
|
26.86
|
|
Paul F. Boling
|
|
|
1/23/06
|
|
|
|
25,000
|
|
|
|
26.65
|
|
|
|
|
5/23/06
|
|
|
|
4,600
|
|
|
|
26.86
|
|
J. Bradley Fisher
|
|
|
1/23/06
|
|
|
|
35,000
|
|
|
|
26.65
|
|
|
|
|
5/23/06
|
|
|
|
4,000
|
|
|
|
26.86
|
|
Gregory E. Evans
|
|
|
1/23/06
|
|
|
|
25,000
|
|
|
|
26.65
|
|
|
|
|
5/23/06
|
|
|
|
5,000
|
|
|
|
26.86
|
|
Richard H. Smith
|
|
|
9/22/06
|
|
|
|
15,000
|
|
|
|
25.46
|
|
|
|
|
(1) |
|
Represents the grant date fair value per share of the awards
calculated in accordance with Statement of Financial Accounting
Standards No. 123(R). For a discussion of the valuation
assumptions, see Note 2 to our financial statements in our
Annual Report on
Form 10-K
for the year ended December 31, 2006. |
15
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
The table below presents information on the outstanding equity
awards held by the named executive officers as of
December 31, 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
|
|
|
|
Stock Awards
|
|
|
|
|
|
|
Awards:
|
|
|
|
|
|
Number
|
|
Market
|
|
|
Number of
|
|
Number of
|
|
Number of
|
|
|
|
|
|
of Shares
|
|
Value of
|
|
|
Securities
|
|
Securities
|
|
Securities
|
|
|
|
|
|
or Units
|
|
Shares or
|
|
|
Underlying
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
of Stock
|
|
Units of
|
|
|
Unexercised
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
Option
|
|
That
|
|
Stock That
|
|
|
Options (#)
|
|
Options (#)
|
|
Unearned
|
|
Exercise
|
|
Expiration
|
|
Have Not
|
|
Have Not
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
Options (#)
|
|
Price ($)
|
|
Date
|
|
Vested (#)
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
5,556
|
(2)
|
|
|
2,778
|
(2)
|
|
|
|
|
|
|
8.27
|
|
|
|
9/3/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
2,778
|
(3)
|
|
|
5,556
|
(3)
|
|
|
|
|
|
|
15.01
|
|
|
|
2/28/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,200
|
(4)
|
|
|
179,924
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
(5)
|
|
|
435,300
|
(5)
|
Paul F. Boling
|
|
|
14,000
|
|
|
|
|
|
|
|
|
|
|
|
5.73
|
|
|
|
8/12/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
16,667
|
(6)
|
|
|
8,333
|
(6)
|
|
|
|
|
|
|
6.98
|
|
|
|
2/19/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,140
|
(7)
|
|
|
91,123
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
(8)
|
|
|
725,500
|
(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,600
|
(9)
|
|
|
133,492
|
(9)
|
J. Bradley Fisher
|
|
|
15,000
|
|
|
|
|
|
|
|
|
|
|
|
4.37
|
|
|
|
4/3/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,900
|
(10)
|
|
|
113,178
|
(10)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,000
|
(11)
|
|
|
1,015,700
|
(11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
(12)
|
|
|
116,080
|
(12)
|
Gregory E. Evans
|
|
|
6,667
|
(13)
|
|
|
13,333
|
(13)
|
|
|
|
|
|
|
14.9
|
|
|
|
3/2/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000
|
(14)
|
|
|
29,020
|
(14)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
(15)
|
|
|
725,500
|
(15)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
(16)
|
|
|
145,100
|
(16)
|
Richard H. Smith
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
(17)
|
|
|
435,300
|
(17)
|
|
|
|
(1) |
|
Based on the closing market price of our common stock on the
Nasdaq Global Market on December 29, 2006 ($29.02 per
share). |
|
(2) |
|
Represents an award of options to purchase 8,334 shares of
common stock that vested/vests in one-third increments on
September 3, 2005, 2006, and 2007. |
|
(3) |
|
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. |
|
(4) |
|
Represents an award of shares of restricted stock, half of which
vest on May 23, 2007 and the other half of which vest on
May 23, 2008. |
|
(5) |
|
Represents an award of shares of restricted stock that vests in
one-third increments on May 23, 2007, 2008, and 2009. |
|
(6) |
|
Represents an award of options to purchase 25,000 shares of
common stock that vested/vests in one-third increments on
February 19, 2005, 2006, and 2007. |
|
(7) |
|
Represents an award of shares of restricted stock, half of which
vest on May 23, 2007 and the other half of which vest on
May 23, 2008. |
|
(8) |
|
Represents an award of shares of restricted stock that vests on
July 23, 2008. |
|
(9) |
|
Represents an award of shares of restricted stock that vests in
one-third increments on May 23, 2007, 2008, and 2009. |
16
|
|
|
(10) |
|
Represents an award of shares of restricted stock, half of which
vest on May 23, 2007 and the other half of which vest on
May 23, 2008. |
|
(11) |
|
Represents an award of shares of restricted stock that vests on
July 23, 2008. |
|
(12) |
|
Represents an award of shares of restricted stock that vests in
one-third increments on May 23, 2007, 2008, and 2009. |
|
(13) |
|
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. |
|
(14) |
|
Represents an award of shares of restricted stock, half of which
vest on May 23, 2007 and the other half of which vest on
May 23, 2008. |
|
(15) |
|
Represents an award of shares of restricted stock that vests on
July 23, 2008. |
|
(16) |
|
Represents an award of shares of restricted stock that vests in
one-third increments on May 23, 2007, 2008, and 2009. |
|
(17) |
|
Represents an award of shares of restricted stock that vests in
one-third increments on September 22, 2007, 2008, and 2009. |
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 2006, and the
vesting of restricted share awards during 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
Number of Shares
|
|
Value Realized on
|
|
Number of Shares
|
|
Value Realized on
|
|
|
Acquired on
|
|
Exercise
|
|
Acquired on Vesting
|
|
Vesting
|
Name
|
|
Exercise (#)
|
|
($)
|
|
(#)
|
|
($)
|
|
S. P. Johnson IV
|
|
|
|
|
|
|
|
|
|
|
3,100
|
|
|
|
85,328
|
|
Paul F. Boling
|
|
|
6,000
|
|
|
|
149,550
|
|
|
|
1,570
|
|
|
|
43,214
|
|
J. Bradley Fisher
|
|
|
15,000
|
|
|
|
401,435
|
|
|
|
1,950
|
|
|
|
53,674
|
|
Gregory E. Evans
|
|
|
|
|
|
|
|
|
|
|
500
|
|
|
|
13,763
|
|
Richard H. Smith
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
Pinnacle
Transaction
During the second quarter of 2003, we and Rocky Mountain Gas,
Inc. (RMG) each contributed our interests in certain
natural gas and oil leases in Wyoming and Montana in areas
prospective for coalbed methane to a newly formed joint venture,
Pinnacle Gas Resources, Inc. In exchange for the contribution of
these assets, we and RMG each received 37.5% of the common stock
of Pinnacle and options to purchase additional Pinnacle common
stock, or, on a fully diluted basis, we and RMG each received an
ownership interest in Pinnacle of 26.9%. U.S. Energy Corp.
and Crested Corp (collectively U.S. Energy)
later succeeded to RMGs interest in Pinnacle. We retained
our interests in approximately 145,000 gross acres in the
Castle Rock project area in Montana and the Oyster Ridge
17
project area in Wyoming. We no longer have a drilling obligation
in connection with the oil and natural gas leases contributed to
Pinnacle.
Simultaneously with the contribution of these assets, affiliates
and related parties of CSFB Private Equity (the CSFB
Parties) contributed approximately $17.6 million of
cash to Pinnacle in return for redeemable preferred stock of
Pinnacle, 25% of Pinnacles common stock as of the closing
date and warrants to purchase Pinnacle common stock at an
exercise price of $100.00 per share, subject to adjustments.
In March 2004, the CSFB parties contributed additional funds of
$11.8 million to continue funding the 2004 development
program of Pinnacle. In 2005, the CSFB Parties contributed
$15.0 million to Pinnacle to finance an acquisition of
additional acreage. CCBM and U.S. Energy elected not to
participate in the equity contribution. In November 2005, the
CSFB Parties and a former Pinnacle employee received 30,000 and
2,000 shares of Pinnacle common stock, respectively, after
exercising certain warrants and options.
In April 2006, prior to and in connection with a private
placement by Pinnacle of 7,400,000 shares of its common
stock, Pinnacle issued 25 new shares of its common stock to each
of its stockholders for each existing share in a stock split;
Pinnacle redeemed the preferred stock held by the CSFB Parties
at 110% of par value; the CSFB Parties exercised all of their
warrants on a cashless net exercise basis; and we
and U.S. Energy exercised our respective options on a
cashless net exercise basis. On April 11, 2006,
after the stock split, the redemption of the preferred stock,
the warrant and option exercises and the private placement, we
owned 2,459,102 shares of Pinnacles common stock, and
our ownership of Pinnacle was 9.5% on a fully diluted basis. On
such date, U.S. Energy and the CSFB Parties owned 2,459,102
and 7,306,782 shares of Pinnacles common stock,
respectively, and
their ownership of Pinnacle was 9.5% and 28.3% on a fully
diluted basis, respectively. On September 22, 2006,
U.S. Energy sold all of its 2,459,102 shares of
Pinnacles common stock to the CSFB Parties. At
December 31, 2006, CCBM owned 2,459,102 shares of
Pinnacles common stock and its ownership of Pinnacle was
9.5% on a fully diluted basis.
We previously had the right to appoint two members of
Pinnacles board of directors. We agreed to give up this
right in connection with the transactions described above.
However, Mr. Johnson and Mr. Parker currently serve on
Pinnacles board of directors.
Immediately following its formation, Pinnacle acquired an
approximate 50% working interest in existing leases and
approximately 36,529 gross acres prospective for coalbed
methane development in the Powder River Basin of Wyoming from an
unaffiliated party for $6.2 million. At the time of the
Pinnacle transaction, these wells were producing at a combined
gross rate of approximately 2.5 MMcfd, or an estimated
1 MMcfd net to Pinnacle. As of December 31, 2006,
Pinnacle owned natural gas and oil leasehold interests in
approximately 454,000 gross (306,000 net) acres and
had estimated net proved reserves of 20.3 Bcf.
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.
The Company, the CSFB Parties, U.S. Energy, Peter G.
Schoonmaker, Gary W. Uhland and Pinnacle also entered into 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 U.S. Energy and certain piggyback registration
rights for the Company and U.S. Energy subject to the
satisfaction of specified conditions.
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.
18
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, the (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 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. Websters 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
has acquired oil and gas leases for approximately
$4.2 million, we paid approximately $4.4 million for
leases from Mr. Webster and we have made option extension
payments of approximately $48,000 to Mr. Webster. There are
currently no outstanding lease options under our arrangement
with Mr. Webster. We may continue to use these arrangements
as a strategic alternative.
Certain
Matters Regarding Mr. Carter
On March 3, 2005, the Board of Directors appointed
Mr. Carter to the Board of Directors and the Nominating
Committee. Mr. Carter and his immediate family members
collectively own interests directly and indirectly through
entities, which are royalty owners in the Companys
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 2006, (1) the Black Stone Entities
collectively earned approximately $170,000 from working
interests in which the Company is a partial owner,
(2) approximately $5,200 of the amount received from these
working interests was attributable to the ownership of
Mr. Carter and his immediate family, and
(3) Mr. Carters family members received
approximately $450 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 January 2006, we acquired certain oil and gas leases for
approximately $1.1 million 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 Acquisition 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.
19
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.
|
|
|
|
|
|
|
Annual
|
|
Name and Current Position
|
|
Salary
|
|
|
S. P. Johnson IV
|
|
$
|
330,000
|
|
President and Chief Executive
Officer
|
|
|
|
|
Paul F. Boling
|
|
$
|
195,000
|
|
Chief Financial Officer, Vice
President, Secretary and Treasurer
|
|
|
|
|
J. Bradley Fisher
|
|
$
|
240,000
|
|
Vice President and Chief Operating
Officer
|
|
|
|
|
Gregory E. Evans
|
|
$
|
190,000
|
|
Vice President of Exploration
|
|
|
|
|
Richard H. Smith(1)
|
|
$
|
180,000
|
|
Vice President of Land
|
|
|
|
|
|
|
|
(1) |
|
Mr. Smiths employment with the Company commenced in
August 2006. |
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 employees 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 Companys
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, 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 employees 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 employees 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 Companys 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
20
comparable to the annual bonus of other Company executives,
taking into account the individuals position and
responsibilities. In the event of a dispute regarding the
employees 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
employees 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 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.
As consideration for certain amendments to their employment
agreements in January 2006, which amendments are reflected in
the descriptions of the employment agreements above,
Mr. Fisher, Mr. Evans and Mr. Boling received
awards of 35,000, 25,000 and 25,000 shares of restricted
stock, respectively. The shares of restricted stock granted to
Messrs. Boling, Fisher and Evans vest in full on the date
30 months following the grant date, in each case subject to
forfeiture upon earlier departure from the Company.
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary
|
|
|
|
|
|
|
|
|
Change of
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
Control
|
|
|
|
|
|
|
|
|
|
(No Good
|
|
|
Good Reason/
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
Executive Benefits and
|
|
Reason/No
|
|
|
Involuntary
|
|
|
Involuntary
|
|
|
(Involuntary,
|
|
|
|
|
|
|
|
Payments Upon Termination of
|
|
Change of
|
|
|
Not for Cause
|
|
|
For Cause
|
|
|
Good Reason,
|
|
|
|
|
|
|
|
S. P. Johnson IV(1)
|
|
Control)
|
|
|
Termination
|
|
|
Termination
|
|
|
Voluntary)
|
|
|
Death
|
|
|
Disability
|
|
|
Severance Payments
|
|
$
|
0
|
|
|
$
|
809,281
|
(2)
|
|
$
|
0
|
|
|
$
|
1,528,202
|
(3)
|
|
$
|
384,521
|
|
|
$
|
809,281
|
|
Long-Term Incentives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and Accelerated Stock
Options(4)
|
|
$
|
0
|
|
|
$
|
135,483
|
|
|
$
|
0
|
|
|
$
|
135,483
|
|
|
$
|
135,483
|
|
|
$
|
135,483
|
|
Unvested and Accelerated
Restricted Shares(5)
|
|
$
|
0
|
|
|
$
|
615,224
|
|
|
$
|
0
|
|
|
$
|
615,224
|
|
|
$
|
615,224
|
|
|
$
|
615,224
|
|
Life Insurance Proceeds
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
265,000
|
|
|
$
|
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
|
|
|
$
|
481,433
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Total:
|
|
$
|
0
|
|
|
$
|
1,579,992
|
|
|
$
|
0
|
|
|
$
|
2,780,346
|
|
|
$
|
1,420,232
|
|
|
$
|
1,579,992
|
|
|
|
|
(1) |
|
The executives current base salary is $330,000.
Information in this table assumes a termination date of
December 31, 2006 and a price per share of our common stock
of $29.02 (the closing market price per share on
December 29, 2006). |
|
(2) |
|
Reflects receipt by the executive of a cash severance payment of
an amount equal to (a) 150% of the executives 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 executives 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 executives 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 |
21
|
|
|
|
|
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 executives base salary through the date of
termination. |
|
(4) |
|
Represents the value of accelerated vesting of stock options
that were unvested at December 31, 2006 based on the
closing market price per share of our common stock on
December 29, 2006. |
|
(5) |
|
Represents the value of accelerated vesting of shares of
restricted stock that were unvested at December 31, 2006
based on the closing market price per share of our common stock
on December 29, 2006. |
|
(6) |
|
Our named executive officers are not eligible for any disability
benefits that not available to our other employees. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary
|
|
|
|
|
|
|
|
|
Change of
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
Control
|
|
|
|
|
|
|
|
|
|
(No Good
|
|
|
Good Reason/
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
Executive Benefits and
|
|
Reason/No
|
|
|
Involuntary
|
|
|
Involuntary
|
|
|
(Involuntary,
|
|
|
|
|
|
|
|
Payments Upon Termination of
|
|
Change of
|
|
|
Not for Cause
|
|
|
For Cause
|
|
|
Good Reason,
|
|
|
|
|
|
|
|
Paul F. Boling(1)
|
|
Control)
|
|
|
Termination
|
|
|
Termination
|
|
|
Voluntary)
|
|
|
Death
|
|
|
Disability
|
|
|
Severance Payments
|
|
$
|
0
|
|
|
$
|
328,808
|
(2)
|
|
$
|
0
|
|
|
$
|
419,057
|
(3)
|
|
$
|
140,000
|
|
|
$
|
328,808
|
|
Long-Term Incentives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and Accelerated Stock
Options(4)
|
|
$
|
0
|
|
|
$
|
183,659
|
|
|
$
|
0
|
|
|
$
|
183,659
|
|
|
$
|
183,659
|
|
|
$
|
183,659
|
|
Unvested and Accelerated
Restricted Shares(5)
|
|
$
|
0
|
|
|
$
|
950,115
|
|
|
$
|
0
|
|
|
$
|
950,115
|
|
|
$
|
950,115
|
|
|
$
|
950,115
|
|
Life Insurance Proceeds
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
265,000
|
|
|
$
|
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
|
|
|
$
|
1,482,586
|
|
|
$
|
0
|
|
|
$
|
1,572,836
|
|
|
$
|
1,558,778
|
|
|
$
|
1,482,586
|
|
|
|
|
(1) |
|
The executives current base salary is $195,000.
Information in this table assumes a termination date of
December 31, 2006 and a price per share of our common stock
of $29.02 (the closing market price per share on
December 29, 2006). |
|
(2) |
|
Reflects receipt by the executive of a cash severance payment of
an amount equal to (a) 100% of the executives 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 executives
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 executives 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 executives
base salary through the date of termination. |
|
(4) |
|
Represents the value of accelerated vesting of stock options
that were unvested at December 31, 2006 based on the
closing market price per share of our common stock on
December 29, 2006. |
|
(5) |
|
Represents the value of accelerated vesting of shares of
restricted stock that were unvested at December 31, 2006
based on the closing market price per share of our common stock
on December 29, 2006. |
|
(6) |
|
Our named executive officers are not eligible for any disability
benefits that not available to our other employees. |
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary
|
|
|
|
|
|
|
|
|
Change of
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
Control
|
|
|
|
|
|
|
|
|
|
(No Good
|
|
|
Good Reason/
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
Executive Benefits and
|
|
Reason/No
|
|
|
Involuntary
|
|
|
Involuntary
|
|
|
(Involuntary,
|
|
|
|
|
|
|
|
Payments Upon Termination of
|
|
Change of
|
|
|
Not for Cause
|
|
|
For Cause
|
|
|
Good Reason,
|
|
|
|
|
|
|
|
J. Bradley Fisher(1)
|
|
Control)
|
|
|
Termination
|
|
|
Termination
|
|
|
Voluntary)
|
|
|
Death
|
|
|
Disability
|
|
|
Severance Payments
|
|
$
|
0
|
|
|
$
|
564,568
|
(2)
|
|
$
|
0
|
|
|
$
|
855,041
|
(3)
|
|
$
|
216,000
|
|
|
$
|
564,568
|
|
Long-Term Incentives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and Accelerated Stock
Options(4)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Unvested and Accelerated
Restricted Shares(5)
|
|
$
|
0
|
|
|
$
|
1,244,958
|
|
|
$
|
0
|
|
|
$
|
1,244,958
|
|
|
$
|
1,244,958
|
|
|
$
|
1,244,958
|
|
Life Insurance Proceeds
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
265,000
|
|
|
$
|
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
|
|
|
$
|
1,829,530
|
|
|
$
|
0
|
|
|
$
|
2,120,003
|
|
|
$
|
1,745,962
|
|
|
$
|
1,829,530
|
|
|
|
|
(1) |
|
The executives current base salary is $240,000.
Information in this table assumes a termination date of
December 31, 2006 and a price per share of our common stock
of $29.02 (the closing market price per share on
December 29, 2006). |
|
(2) |
|
Reflects receipt by the executive of a cash severance payment of
an amount equal to (a) 275% of the executives 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 executives 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 executives 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 executives base
salary through the date of termination. |
|
(4) |
|
Represents the value of accelerated vesting of stock options
that were unvested at December 31, 2006 based on the
closing market price per share of our common stock on
December 29, 2006. |
|
(5) |
|
Represents the value of accelerated vesting of shares of
restricted stock that were unvested at December 31, 2006
based on the closing market price per share of our common stock
on December 29, 2006. |
|
(6) |
|
Our named executive officers are not eligible for any disability
benefits that not available to our other employees. |
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary
|
|
|
|
|
|
|
|
|
Change of
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
Control
|
|
|
|
|
|
|
|
|
|
(No Good
|
|
|
Good Reason/
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
Executive Benefits and
|
|
Reason/No
|
|
|
Involuntary
|
|
|
Involuntary
|
|
|
(Involuntary,
|
|
|
|
|
|
|
|
Payments Upon Termination
|
|
Change of
|
|
|
Not for Cause
|
|
|
For Cause
|
|
|
Good Reason,
|
|
|
|
|
|
|
|
of Gregory E. Evans(1)
|
|
Control)
|
|
|
Termination
|
|
|
Termination
|
|
|
Voluntary)
|
|
|
Death
|
|
|
Disability
|
|
|
Severance Payments
|
|
$
|
0
|
|
|
$
|
335,966
|
(2)
|
|
$
|
0
|
|
|
$
|
423,902
|
(3)
|
|
$
|
152,000
|
|
|
$
|
355,966
|
|
Long-Term Incentives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested and Accelerated Stock
Options(4)
|
|
$
|
0
|
|
|
$
|
188,267
|
|
|
$
|
0
|
|
|
$
|
188,267
|
|
|
$
|
188,267
|
|
|
$
|
188,267
|
|
Unvested and Accelerated
Restricted Shares(5)
|
|
$
|
0
|
|
|
$
|
899,620
|
|
|
$
|
0
|
|
|
$
|
899,620
|
|
|
$
|
899,620
|
|
|
$
|
899,620
|
|
Life Insurance Proceeds
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
265,000
|
|
|
$
|
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
|
|
|
$
|
169,906
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Total:
|
|
$
|
0
|
|
|
$
|
1,443,857
|
|
|
$
|
0
|
|
|
$
|
1,701,699
|
|
|
$
|
1,524,891
|
|
|
$
|
1,443,857
|
|
|
|
|
(1) |
|
The executives current base salary is $190,000.
Information in this table assumes a termination date of
December 31, 2006 and a price per share of our common stock
of $29.02 (the closing market price per share on
December 28, 2006). |
|
(2) |
|
Reflects receipt by the executive of a cash severance payment of
an amount equal to (a) 100% of the executives 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 executives
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 executives 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 executives
base salary through the date of termination. |
|
(4) |
|
Represents the value of accelerated vesting of stock options
that were unvested at December 31, 2006 based on the
closing market price per share of our common stock on
December 29, 2006. |
|
(5) |
|
Represents the value of accelerated vesting of shares of
restricted stock that were unvested at December 31, 2006
based on the closing market price per share of our common stock
on December 29, 2006. |
|
(6) |
|
Our named executive officers are not eligible for any disability
benefits that not available to our other employees. |
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary
|
|
|
|
|
|
|
|
|
Change of
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
Control
|
|
|
|
|
|
|
|
|
|
(No Good
|
|
|
Good Reason/
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
Executive Benefits and
|
|
Reason/No
|
|
|
Involuntary
|
|
|
Involuntary
|
|
|
(Involuntary,
|
|
|
|
|
|
|
|
Payments Upon Termination
|
|
Change of
|
|
|
Not for Cause
|
|
|
For Cause
|
|
|
Good Reason,
|
|
|
|
|
|
|
|
of Richard H. Smith(1)
|
|
Control)
|
|
|
Termination
|
|
|
Termination
|
|
|
Voluntary)
|
|
|
Death
|
|
|
Disability
|
|
|
Severance Payments
|
|
$
|
0
|
|
|
$
|
210,724
|
(2)
|
|
$
|
0
|
|
|
$
|
294,032
|
(3)
|
|
$
|
36,440
|
|
|
$
|
210,724
|
|
Long-Term Incentives Unvested and
Accelerated Stock Options(4)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Unvested and Accelerated
Restricted Shares(5)
|
|
$
|
0
|
|
|
$
|
435,300
|
|
|
$
|
0
|
|
|
$
|
435,300
|
|
|
$
|
435,300
|
|
|
$
|
435,300
|
|
Life Insurance Proceeds
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
265,000
|
|
|
$
|
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
|
|
|
$
|
666,028
|
|
|
$
|
0
|
|
|
$
|
749,336
|
|
|
$
|
756,744
|
|
|
$
|
666,028
|
|
|
|
|
(1) |
|
The executives current base salary is $180,000.
Information in this table assumes a termination date of
December 31, 2006 and a price per share of our common stock
of $29.02 (the closing market price per share on
December 29, 2006). |
|
(2) |
|
Reflects receipt by the executive of a cash severance payment of
an amount equal to (a) 100% of the executives 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 executives
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 executives 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 executives
base salary through the date of termination. |
|
(4) |
|
Represents the value of accelerated vesting of stock options
that were unvested at December 31, 2006 based on the
closing market price per share of our common stock on
December 29, 2006. |
|
(5) |
|
Represents the value of accelerated vesting of shares of
restricted stock that were unvested at December 31, 2006
based on the closing market price per share of our common stock
on December 29, 2006. |
|
(6) |
|
Our named executive officers are not eligible for any disability
benefits that not available to our other employees. |
25
Audit
Committee Report
The Audit Committees purpose is to assist the Board of
Directors in its oversight of the Companys 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
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
Companys website at www.crzo.net.
Management is responsible for the preparation, presentation and
integrity of the Companys 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 account 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 Companys
Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006.
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
Committees 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 Committees considerations and
discussions referred to above do not assure that the audit of
the Companys 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 Companys Annual Report
on
Form 10-K.
26
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 Companys
board of directors the inclusion of the Compensation
Discussion and Analysis section in the Companys
proxy statement for the 2007 annual general meeting of
shareholders.
This report is issued as of April 25, 2007.
The Compensation Committee
F. Gardner Parker
Roger A. Ramsey
Pursuant to SEC Rules, the foregoing Compensation Committee
Report is not deemed filed with the SEC and is not
incorporated by reference into the Companys Annual Report
on
Form 10-K.
Equity
Compensation Plans
Information concerning our equity compensation plans at
December 31, 2006 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
|
|
|
Remaining Available
|
|
|
|
|
|
|
|
|
|
for Future Issuance
|
|
|
|
Number of Securities
|
|
|
|
|
|
Under Equity
|
|
|
|
to be Issued
|
|
|
Weighted-Average
|
|
|
Compensation Plans
|
|
|
|
Upon Exercise of
|
|
|
Exercise Price of
|
|
|
(Excluding Securities
|
|
|
|
Outstanding Options,
|
|
|
Outstanding Options,
|
|
|
Reflected in Column (a))
|
|
Plan Category
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
Equity compensation plans approved
by security holders
|
|
|
891,069
|
|
|
$
|
5.25
|
|
|
|
543,931
|
|
PROPOSAL 2
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, 2007. PKF
served as the Companys independent public registered
accounting firm for the fiscal year ended December 31,
2006. 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 Companys independent registered public
accounting firm for 2007. 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.
27
Independent
Registered Public Accounting Firms Fees
PKF billed the Company as set forth in the table below for
professional services rendered for the audit of the
Companys annual financial statements for the years ended
December 31, 2006 and 2005 and for the review of the
Companys quarterly financial statements included in the
Companys Quarterly Reports on
Form 10-Q
for 2006 and 2005 and for work on other SEC filings. PKF did not
provide any non-audit services for the Company during 2006 or
2005.
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Description
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Fiscal 2006
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Fiscal 2005
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Audit Fees
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$
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364,040
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$
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427,915
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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 2006.
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 2007.
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 shareholders 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
Companys proxy statement and form of proxy for the 2008
Annual Meeting of Shareholders must be received by the Company
no later than January 1, 2008. However, if the date of the
2008 Annual Meeting of Shareholders changes by more than
30 days from the date of the 2007 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.
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
Companys Bylaws. The Companys 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 2008 Annual Meeting
of Shareholders is the same as the date of the 2007 Annual
Meeting of Shareholders, shareholders who wish to nominate
directors or to bring business before the 2008 Annual Meeting of
Shareholders must notify the Company no later than March 3,
2008.
A copy of the Companys Bylaws setting forth the
requirements for the nomination of director candidates by
stockholders and the requirements for proposals by stockholders
may be obtained from the Companys 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 Companys proxy solicitation
material.
28
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 2006, 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
PAUL F. BOLING
Paul F. Boling
Secretary
Dated: April 25, 2007
Houston, Texas
29
CARRIZO OIL & GAS, INC.
MAY 22, 2007
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, May 22, 2007, 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 and 3. 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.
May 22, 2007
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
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.
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.
1. Election of Directors:
O S.P. Johnson IV
O Steven A. Webster
O Thomas L. Carter, Jr.
O Paul B. Loyd, Jr.
O F. Gardner Parker
O Roger A. Ramsey
O Frank A. Wojtek
2. Approval of the Appointment of Pannell Kerr Forster of Texas,
P.C. as the Companys Independent Registered Public
Accounting Firm for the fiscal year ending December 31, 2007.
3. With discretionary authority as to such other matters as may properly come
before the meeting.
FOR AGAINST ABSTAIN
FOR ALL NOMINEES
WITHHOLD AUTHORITY
FOR ALL NOMINEES
FOR ALL EXCEPT
(See instructions below)
INSTRUCTION: To withhold authority to vote for any individual nominee(s), mark FOR ALL EXCEPT
and fill in the circle next to each nominee you wish to withhold, as shown here:
NOMINEES:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF DIRECTORS AND FOR PROPOSAL 2.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR
BLACK INK AS SHOWN HERE x
Please detach along perforated line and mail in the envelope provided.