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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement.
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2)).
[X] Definitive Proxy Statement.
[ ] Definitive Additional Materials.
[ ] Soliciting Material Pursuant to Section 240.14a-12
Callon Petroleum Company
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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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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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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PERSONS WHO POTENTIALLY ARE TO RESPOND TO THE COLLECTION OF INFORMATION
CONTAINED IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A
CURRENTLY VALID OMB CONTROL NUMBER.
SEC 1913 (02-02)
CALLON PETROLEUM COMPANY
200 NORTH CANAL STREET
NATCHEZ, MISSISSIPPI 39120
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FRIDAY, MAY 2, 2003
To the Shareholders of
Callon Petroleum Company (the "Company"):
Notice is hereby given that the Annual Meeting of Shareholders (the
"Annual Meeting") of the Company will be held in Natchez, Mississippi, on
Friday, May 2, 2003, at 9:00 a.m., in the St. Louis Room of the Natchez
Convention Center, 211 Main Street, Natchez, Mississippi 39120, for the
following purposes:
1. To elect two Class III directors to hold office until the 2006
Annual Meeting of Shareholders; and
2. To ratify the appointment of Ernst & Young LLP as the
Company's independent auditors for the fiscal year ending
December 31, 2003; and
3. To transact such other business as may properly come before
the Annual Meeting or any adjournment or adjournments thereof.
Shareholders of record at the close of business on March 21, 2003 will
be entitled to notice of, and to vote at, the Annual Meeting, or any adjournment
or adjournments thereof.
Shareholders are cordially invited to attend the Annual Meeting in
person. Those individuals who will not attend and who wish for their shares to
be voted are requested to sign, date and mail promptly the enclosed proxy card
for which a postage-prepaid return envelope is provided.
By Order of the Board of Directors
/S/ Robert A. Mayfield
Robert A. Mayfield
Corporate Secretary
Natchez, Mississippi
April 14, 2003
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. IF YOU
CANNOT ATTEND, PLEASE SIGN AND DATE THE ACCOMPANYING PROXY CARD AND RETURN IT
PROMPTLY IN THE RETURN ENVELOPE ENCLOSED FOR YOUR USE. NO POSTAGE IS REQUIRED IF
THE ENVELOPE IS MAILED IN THE UNITED STATES.
PROXY STATEMENT
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CALLON PETROLEUM COMPANY
200 NORTH CANAL STREET
NATCHEZ, MISSISSIPPI 39120
(601) 442-1601
-----------------
ANNUAL MEETING OF SHAREHOLDERS
FRIDAY, MAY 2, 2003
-----------------
SOLICITATION AND REVOCABILITY OF PROXIES
This Proxy Statement is furnished in connection with the solicitation
of proxies on behalf of the Board of Directors of Callon Petroleum Company, a
Delaware corporation (the "Company"), from holders ("Shareholders") of the
common stock, $.01 par value per share ("Common Stock"), of the Company for use
at the Annual Meeting of Shareholders of the Company to be held on Friday, May
2, 2003, at 9:00 a.m., in the St. Louis Room of the Natchez Convention Center,
211 Main Street, Natchez, Mississippi 39120, and at any adjournment or
adjournments thereof (such meeting or adjournment thereof is referred to herein
as the "Annual Meeting"), for the purpose of considering and voting upon the
matters set forth in the accompanying Notice of Annual Meeting of Shareholders
("Notice").
A proxy in the form accompanying this Proxy Statement (each a "Proxy"),
when properly executed and returned, will be voted in accordance with the
directions specified on the Proxy, and otherwise in accordance with the judgment
of the persons designated therein as proxies. Any Proxy which does not withhold
authority to vote or on which no other instructions are given will be voted for
the election of the nominees named herein to the Board of Directors and in favor
of the other proposals set forth in the Notice. Any Proxy may be revoked at any
time before it is exercised by delivering, to the Secretary of the Company,
written notice of revocation or a duly executed Proxy bearing a later date, or
by voting in person at the Annual Meeting.
This Proxy Statement and the accompanying Notice and form of Proxy are
being mailed to Shareholders on or about April 14, 2003. The Annual Report for
the Company's fiscal year ended December 31, 2002 is also being mailed to
Shareholders contemporaneously with this Proxy Statement, although the Annual
Report does not form a part of the material for the solicitation of Proxies.
Proxies will be solicited primarily by mail, but employees of the
Company may also solicit Proxies in person or by telephone. Arrangements may be
made with brokerage firms or other custodians, nominees, and fiduciaries to send
proxy materials to the beneficial owners of the Common Stock of the Company. All
costs incurred in the solicitation of Proxies will be borne by the Company.
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
Unless otherwise indicated, Proxies in the form enclosed that are
properly executed, duly returned, and not revoked will be voted in favor of (1)
the election of the two Class III director nominees to the Board of Directors
named herein, and (2) the ratification of the appointment of Ernst & Young LLP
as the Company's independent auditors for the fiscal year ending December 31,
2003.
The Board of Directors is not presently aware of other proposals that
may be brought before the Annual Meeting. In the event other proposals are
brought before the Annual Meeting, the persons named in the enclosed Proxy will
vote in accordance with what they consider to be in the best interests of the
Company and its Shareholders.
VOTING REQUIREMENTS
The Board of Directors has fixed the close of business on March 21,
2003 as the record date (the "Record Date") for the determination of
Shareholders entitled to notice of, and to vote at, the Annual Meeting. A
complete list of all Shareholders entitled to vote at the Annual Meeting will be
open for examination by any Shareholder during normal business hours for a
period of ten days prior to the Annual Meeting at the offices of the Company,
200 North Canal Street, Natchez, Mississippi 39120. Such list will also be
available at the Annual Meeting and may be inspected by any Shareholder who is
present. On the Record Date, the Company's outstanding voting securities
consisted of 13,919,457 shares of Common Stock. Holders of Common Stock will be
entitled to one vote per share of Common Stock held of record on the Record Date
for each proposal to be presented at the Annual Meeting.
QUORUM AND OTHER MATTERS
The holders of a majority of the total shares of Common Stock issued
and outstanding on the Record Date, whether present in person or represented by
Proxy, will constitute a quorum for the transaction of business at the Annual
Meeting. For purposes of determining whether a quorum is present under Delaware
law, broker non-votes and abstentions count towards the establishment of a
quorum. The election of directors requires the favorable vote of the holders of
a plurality of shares of Common Stock present and voting, in person or by Proxy,
at the Annual Meeting. Abstentions and broker non-votes have no effect on
determinations of plurality except to the extent that they affect the total
votes received by any particular candidate. A majority of the votes represented
by the Shareholders present at the Annual Meeting, in person or by proxy, is
necessary for ratification of the appointment of the Company's independent
auditors. Abstaining shares will be considered present at the Annual Meeting for
this matter so that the effect of abstentions will be the equivalent of a "no"
vote. With respect to broker non-votes, the shares will not be considered
present at the Annual Meeting for this matter so that broker non-votes will have
the practical effect of reducing the number of affirmative votes required to
achieve a majority vote by reducing the total number of shares from which the
majority is calculated.
2
BENEFICIAL OWNERSHIP OF SECURITIES
MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The following table sets forth, as of the Record Date, certain
information with respect to the ownership of shares of Common Stock and the
Company's $2.125 Convertible Exchangeable Preferred Stock ("Preferred Stock") as
to (i) all persons known by the Company to be the beneficial owners of 5% or
more of the outstanding Common Stock, (ii) each director, (iii) each nominee for
director, (iv) each of the executive officers named in the Summary Compensation
Table, and (v) all executive officers and directors of the Company as a group.
Information set forth in the table with respect to beneficial ownership of
Common Stock and Preferred Stock has been obtained from filings made by the
named beneficial owners with the Securities and Exchange Commission
("Commission") as of the Record Date or, in the case of executive officers and
directors of the Company, has been provided to the Company by such individuals.
Holders of Preferred Stock are not entitled to vote at the Annual Meeting.
COMMON STOCK
----------------------------------
NAME AND ADDRESS OF BENEFICIAL
BENEFICIAL OWNER OWNERSHIP PERCENT
(A)
--------------------------------------------------- ----------------- -------------
Directors:
John S. Callon ............................... 234,384(b) 1.67%
Fred L. Callon ............................... 795,339(c) 5.58%
200 North Canal Street
Natchez, Mississippi 39120
Dennis W. Christian .......................... 363,095(d) 2.56%
Leif Dons .................................... 40,250(e) *
Robert A. Stanger ............................ 92,856(f) *
John C. Wallace .............................. 1,986,138(g) 14.19%
72 Chelsea Gate Apartments
93 Ebury Bridge Road
London, SW1W 8RB, United Kingdom
B. F. Weatherly .............................. 94,288(h) *
Richard O. Wilson ............................ 133,328(i) *
Named Executive Officers:
John S. Weatherly ............................ 332,268(j) 2.34%
Stephen F. Woodcock .......................... 131,558(k) *
Kathy G. Tilley .............................. 243,869(l) 1.73%
Directors and Executive Officers:
as a Group (16 persons) ...................... 4,865,253(m) 30.63%
Certain Beneficial Owners:
Ganger Rolf ASA .............................. 1,839,386(n) 13.21%
Fred. Olsensgate 2
0152 Oslo, Norway
Bonheur ASA .................................. 1,839,386(n) 13.21%
Fred. Olsensgate 2
0152 Oslo, Norway
State Street Research & Management Company ... 894,400(o) 6.43%
One Financial Center, Thirtieth Floor
Boston, Massachusetts 02111-2690
Dimensional Fund Advisors Inc. ............... 946,700(p) 6.80%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
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* Less than 1%
(a) Unless otherwise indicated, each of the persons listed in the following
table may be deemed to have sole voting and dispositive power with
respect to such shares.
(b) Of the 234,384 shares beneficially owned by John S. Callon, 104,437 are
owned directly by him; 10,000 shares are owned in joint tenancy with
his wife; 4,947 shares are owned within the Company's Employee Savings
and Protection Plan; 90,000 shares are subject to options under the
Company's 1994 Stock Incentive Plan ("1994 Plan") exercisable within 60
days; and 25,000 shares
3
are subject to options under the Company's 1996 Stock Incentive Plan
("1996 Plan") exercisable within 60 days. Shares indicated as owned
by John S. Callon do not include 43,501 shares of Common Stock owned
by his wife over which he disclaims beneficial ownership.
(c) Of the 795,339 shares beneficially owned by Fred L. Callon, 277,487
shares are owned directly by him; 184,378 shares are held by him as
custodian for certain minor Callon family members; 8,474 shares are
owned within the Company's Employee Savings and Protection Plan; 80,000
shares are subject to options under the 1994 Plan exercisable within 60
days; and 245,000 shares are subject to options under the 1996 Plan
exercisable within 60 days. Shares indicated as owned by Fred L. Callon
do not include 24,939 shares of Common Stock owned by his wife over
which he disclaims beneficial ownership.
(d) Of the 363,095 shares beneficially owned by Dennis W. Christian, 70,338
are owned directly by him; 7,757 shares are owned within the Company's
Employee Savings and Protection Plan; 60,000 shares are subject to
options under the 1994 Plan exercisable within 60 days; and 225,000
shares are subject to options under the 1996 Plan exercisable within 60
days.
(e) Of the 40,250 shares beneficially owned by Leif Dons, 5,250 are owned
directly by him; 5,000 shares are subject to options under the 1994
Plan exercisable within 60 days and 30,000 shares are subject to
options under the 1996 Plan exercisable within 60 days.
(f) Of the 92,856 shares beneficially owned by Robert A. Stanger, 12,856
are owned directly by him; 25,000 shares are subject to options under
the 1994 Plan exercisable within 60 days; and 55,000 shares are subject
to options under the 1996 Plan exercisable within 60 days.
(g) Of the 1,986,138 shares beneficially owned by John C. Wallace, 49,781
shares are owned directly by him; 25,000 shares are subject to options
under the 1994 Plan exercisable within 60 days; 55,000 shares are
subject to options under the 1996 Plan exercisable within 60 days;
16,971 shares are owned by Fred. Olsen, Ltd.; and 1,839,386 shares are
owned by Ganger Rolf ASA ("Ganger Rolf") and Bonheur ASA ("Bonheur").
See note (n).
(h) Of the 94,288 shares beneficially owned by B. F. Weatherly, 14,288
shares are owned directly by him; 25,000 shares are subject to options
under the 1994 Plan exercisable within 60 days; and 55,000 shares are
subject to options under the 1996 Plan exercisable within 60 days.
(i) Of the 133,328 shares beneficially owned by Richard O. Wilson, 25,000
shares are subject to options under the 1994 Plan exercisable within 60
days; 55,000 shares are subject to options under the 1996 Plan
exercisable within 60 days; 49,464 shares are held in a family limited
partnership; and 3,864 shares are issuable upon conversion of 1,700
shares of Preferred Stock held in the family limited partnership.
(j) Of the 332,268 shares beneficially owned by John S. Weatherly, 65,947
are owned directly by him; 218 shares are held as custodian for his
minor children; 7,103 shares are owned within the Company's Employee
Savings and Protection Plan; 60,000 shares are subject to options under
the 1994 Plan exercisable within 60 days; and 199,000 shares are
subject to options under the 1996 Plan exercisable within 60 days.
(k) Of the 131,558 shares beneficially owned by Stephen F. Woodcock, 22,611
are owned directly by him; 4,947 shares are owned within the Company's
Employee Savings and Protection Plan; and 104,000 shares are subject to
options under the 1996 Plan exercisable within 60 days.
(l) Of the 243,869 shares beneficially owned by Kathy G. Tilley, 50,353 are
owned directly by her; 5,516 shares are owned within the Company's
Employee Savings and Protection Plan; 30,000 shares are subject to
options under the 1994 Plan exercisable within 60 days; and 158,000
shares are subject to options under the 1996 Plan exercisable within 60
days.
(m) Includes 500,000 shares subject to options under the 1994 Plan
exercisable within 60 days; 1,460,500 shares subject to options under
the 1996 Plan exercisable within 60 days; and 3,864 shares issuable
upon conversion of 1,700 shares of Preferred Stock.
(n) As disclosed on a Schedule 13D/A, filed with the Commission on March 6,
2002, by Ganger Rolf, Bonheur, AS Quatro ("Quatro"), and Invento AS
("Invento"). On August 28, 2000, Ganger Rolf and Bonheur jointly
purchased from Fred. Olsen Energy ASA ("F.O. Energy") an aggregate of
1,839,386 shares of Common Stock. Ganger Rolf and Bonheur are currently
registered as the joint record owner of, and both possess shared voting
and dispositive power with respect to, all of the
4
1,839,386 shares of Common Stock formerly owned by F.O. Energy. F.O.
Energy no longer owns any Common Stock. Quatro is the owner of 21.3% of
the outstanding capital stock of Bonheur, and Invento is the owner of
20.8% of the outstanding capital stock of Bonheur. Quatro and Invento
disclaim beneficial ownership of the shares of Common Stock owned by
Ganger Rolf and Bonheur. John C. Wallace, one of our directors, is a
director of Ganger Rolf and Bonheur, as well as other companies
associated with Ganger Rolf and Bonheur, and as a result, may be deemed
to share the power to vote and dispose of, and, therefore, be a
beneficial owner of, the shares of Common Stock owned by Ganger Rolf
and Bonheur. The principal business address and principal executive
offices of Quatro and Invento are located at Fred. Olsensgate 2, 0152
Oslo, Norway.
(o) Information is based upon a Schedule 13G provided to the Company dated
February 14, 2003, by State Street Research & Management Company
("State Street"). In this Schedule 13G, State Street represents that it
has sole voting power with respect to 859,400 shares of Common Stock
and sole dispositive power with respect to 894,400 shares of Common
Stock.
(p) Information is based upon a Schedule 13G/A, filed with the Commission
on February 13, 2003, by Dimensional Fund Advisors Inc.
("Dimensional"). In this Schedule 13G, Dimensional represents that it
has sole voting power and sole dispositive power with respect to
946,700 shares of Common Stock.
PROPOSAL I
ELECTION OF DIRECTORS
NOMINEES
The Company's Certificate of Incorporation provides for a classified
Board of Directors. The Board of Directors is divided into three classes of
nearly equal size, designated as Class I (currently with three directors), Class
II (currently with three directors) and Class III (currently with two
directors). One class of directors is elected at each annual meeting of
Shareholders to serve for a three-year term.
The terms of the two Class III directors, Messrs. Fred L. Callon and
Dennis W. Christian, will expire on the date of the Annual Meeting. Messrs. Fred
L. Callon and Dennis W. Christian (the "Nominees") have been nominated to serve
as Class III directors until the 2006 Annual Meeting and until their respective
successors have been duly elected and qualified. Each of the Nominees was
nominated by the Board of Directors.
It is intended that all shares of Common Stock represented by the
Proxies will be voted for the election of the Nominees, except where authority
to vote in the election of directors has been withheld. Should the Nominees
become unable or unwilling to serve as directors at the time of the Annual
Meeting, the person or persons exercising the Proxies will vote for the election
of substitute Nominees designated by the Board of Directors, or the Board of
Directors may choose to reduce the number of members of the Board of Directors
to be elected at the Annual Meeting in order to eliminate the vacancy. The
Nominees have consented to be nominated and have expressed their intention to
serve if elected. The Board of Directors has no reason to believe that the
Nominees will be unable or unwilling to serve if elected. Only the Nominees or
substitute Nominees designated by the Board of Directors will be eligible to
stand for election as directors at the Annual Meeting. See "Shareholders'
Proposals for 2004 Annual Meeting."
5
DIRECTORS AND EXECUTIVE OFFICERS
The following table provides information with respect to the Nominees,
all current directors whose terms will continue after the Annual Meeting, and
the present executive officers of the Company. Each executive officer has been
elected to serve until his or her successor is duly appointed or elected by the
Board of Directors or their earlier removal or resignation from office.
COMPANY
POSITION
NAME AGE SINCE PRESENT COMPANY POSITION
------------------------------------- ---------- ------------------ ----------------------------------------------
CLASS I DIRECTORS:
(Term Expires in 2004)
Robert A. Stanger.................. 63 1995 Director
John C. Wallace.................... 64 1994 Director
Richard O. Wilson.................. 73 1995 Director
CLASS II DIRECTORS:
(Term Expires in 2005)
John S. Callon..................... 83 1994 Director; Chairman of the Board
Leif Dons.......................... 53 1999 Director
B. F. Weatherly.................... 58 1994 Director
CLASS III DIRECTORS:
(Term Expires in 2003)
Fred L. Callon..................... 53 1994 Director; President; Chief Executive
Officer; Nominee
Dennis W. Christian................ 56 1994 Director; Senior Vice President; Chief
Operating Officer; Nominee
OTHER EXECUTIVE OFFICERS:
James O. Bassi..................... 48 1997 Vice President; Controller
Robert A. Mayfield................. 52 2000 Corporate Secretary
Thomas E. Schwager................. 52 1997 Vice President
H. Clark Smith .................... 50 2001 Corporate Information Officer
Rodger W. Smith.................... 53 1999 Treasurer
Kathy G. Tilley.................... 57 1996 Vice President
John S. Weatherly.................. 51 1994 Senior Vice President; Chief Financial
Officer
Stephen F. Woodcock................ 51 1997 Vice President
The following is a brief description of the background and principal
occupation of each director (including each Nominee) and executive officer:
James O. Bassi is Vice President and Controller of the Company and
Callon Petroleum Operating Company ("Callon Petroleum Operating"). Prior to
being appointed Vice President in November 1997, he had been Controller since
June 1997. Prior to being appointed to his position as Controller, he had been
Manager of the Accounting Department for the Company and Callon Petroleum
Operating. Mr. Bassi has been employed by the Company and its predecessors for a
total of twelve years. Prior to his employment by the Company, he was employed
by Arthur Andersen LLP. He received his B.S. degree in accounting in 1976 from
Mississippi State University. He is a member of the American Institute of
Certified Public Accountants and the Mississippi Society of Certified Public
Accountants.
Fred L. Callon has been President and Chief Executive Officer of the
Company and Callon Petroleum Operating since January 1997. Prior to January
1997, he was President and Chief Operating Officer of the Company, positions he
had held with the Company or its predecessors since 1984. He has been employed
by the Company or its predecessors since 1976. Mr. Callon graduated from
Millsaps College in 1972 and received his M.B.A. degree from the Wharton School
of Finance in 1974. Following graduation and until his employment by Callon
Petroleum Operating, he was employed by Peat, Marwick, Mitchell & Co., certified
public accountants. He is the nephew of John S. Callon.
John S. Callon is Chairman of the Board of Directors of the Company and
Callon Petroleum Operating. Effective January 2, 1997, John S. Callon resigned
from his position as Chief Executive Officer of the Company, a position he had
held since 1980. Mr. Callon founded the Company's predecessors in
6
1950, and has held an executive office with the Company or its predecessors
since that time. He has served as a director of the Mid-Continent Oil and Gas
Association and as the President of the Association's Mississippi-Alabama
Division. He has also served as Vice President for Mississippi of the
Independent Petroleum Association of America. He is a member of the American
Petroleum Institute. Mr. Callon is the uncle of Fred L. Callon.
Dennis W. Christian has been Senior Vice President and Chief Operating
Officer of the Company and Callon Petroleum Operating since January 1997. Prior
to January 1997, he was Senior Vice President of Operations and Acquisitions and
had held that or similar positions with the Company or its predecessors since
1981. Prior to joining Callon Petroleum Operating, he was resident manager in
Stavanger, Norway, for Texas Eastern Transmission Corporation. His previous
experience includes five years with Chevron U.S.A. Inc. Mr. Christian received
his B.S. degree in petroleum engineering in 1969 from Louisiana Polytechnic
Institute.
Leif Dons has since 1997 been Senior Vice President, Business
Development of Fred. Olsen Energy ASA, a publicly held Norwegian company engaged
in the offshore energy service industry. From 1992 until 1997, Mr. Dons was
employed by Kvaerner ASA in various positions, including the fields of
international operations and the commercialization of new technology, and as
resident country manager responsible for Israel and Palestine. From 1983 until
1991, he served as the Managing Director of Norwegian Oil Consortium A/S & Co.,
an oil company with producing properties in Norway. He negotiated the sale of
that company in 1991. From 1973 until 1983, Mr. Dons held various positions as
an analyst, staff engineer and economist at the Pulp and Paper Research
Institute, Norway and Saga Petroleum ASA. Mr. Dons received a Master of Science
degree in engineering from the Norwegian Institute of Technology in 1973.
Robert A. Mayfield is the Corporate Secretary and also oversees Tax
Services for the Company and Callon Petroleum Operating. He was appointed
Corporate Secretary in February 2000. Prior to his appointment as Corporate
Secretary, he had served as the Manager of Tax Services and Securities and
Exchange Commission Reporting since 1981. Prior to joining Callon, he was
employed by McCormick Oil and Gas Company in Houston, Texas, where he served as
an assistant to the tax manager. Mr. Mayfield received his B.S. degree in
accounting from Louisiana Tech University in 1972 and is a member of the
American Society of Corporate Secretaries.
Thomas E. Schwager has been Vice President of Engineering and
Operations for the Company and Callon Petroleum Operating since November 1997.
Mr. Schwager has held various engineering positions with the Company and its
predecessors since 1981. Prior to joining the Company, Mr. Schwager held
engineering positions with Exxon Company USA in Louisiana and Texas. He received
his B.S. degree in petroleum engineering from Louisiana State University in
1972. He is a registered professional engineer and a member of the Society of
Petroleum Engineers.
H. Clark Smith is Corporate Information Officer for the Company and
Callon Petroleum Operating. Prior to being appointed to that position in March
2001, he had served as Manager - Information Technology since January 1990 and
in other computer related positions with the Company and its predecessors since
1983. At Mississippi State University, he majored in Industrial Technology.
During his tenure with the Company, he has received extensive technical and
management training from the University of Southern Mississippi, International
Business Machines, Microsoft, Novell, and Arthur Andersen & Company. He has also
served as Manager - Information Services with Jefferson Davis Regional Medical
Center and as a principal of the consulting firm, Mississippi Computing
Consultants.
Rodger W. Smith is the Treasurer for the Company and Callon Petroleum
Operating. Prior to being appointed to that position in April 1999, he had
served as Manager of Budget and Analysis since 1994. Prior to 1994, Mr. Smith
was Manager of Exploration and Production Accounting and has been employed by
the Company and its predecessors since 1983. Prior to his employment with the
Company, he was employed by International Paper Company as a plant controller.
He received his B.S. degree in accounting from the University of Southern
Mississippi in 1973.
Robert A. Stanger since 1978 has been the Chief Executive Officer and
Chairman of Robert A. Stanger & Company, Inc., a Shrewsbury, New Jersey-based
firm engaged in publishing financial material and providing investment banking
services to the real estate and oil and gas industries. He is a director of
Citizens Utilities, Stamford, Connecticut, a provider of telecommunications,
electric, natural gas, and water services. Previously, Mr. Stanger was Vice
President of Merrill Lynch & Co. He received his B.A. degree in economics from
Princeton University in 1961. Mr. Stanger is a member of the National
Association of Securities Dealers and the New York Society of Security Analysts.
7
Kathy G. Tilley is Vice President of Business Development for the
Company and Callon Petroleum Operating, a position she has held since April
1996. Ms. Tilley was employed by Callon Petroleum Operating in December 1989 as
Manager of Acquisitions and prior thereto, had held that or similar positions as
a consultant to the Company since 1981. Ms. Tilley received her B.A. degree in
economics from Louisiana State University in 1967.
John C. Wallace is a Chartered Accountant having qualified with
PricewaterhouseCoopers in Canada in 1963, after which he joined Baring Brothers
& Co., Limited in London, England. For over twenty years, he has served as
Chairman of Fred. Olsen Ltd., a London-based corporation that he joined in 1968
and which specializes in the business of shipping, renewable energy and property
development. Mr. Wallace is a director of Fred. Olsen Energy ASA, a
publicly-held Norwegian company engaged in the offshore energy service industry;
and Ganger Rolf ASA and Bonheur ASA, Oslo, both publicly-traded shipping
companies.
B. F. Weatherly has been a principal of CapSource Financial, Houston,
Texas, an investment-banking firm, since 1989. He is also a general partner of
CapSource Fund, L.P., Jackson, Mississippi, an investment fund, and has held
that position since 1997. Mr. Weatherly received a Master of Accountancy degree
from the University of Mississippi in 1967. Mr. Weatherly has previously been
associated with Arthur Andersen LLP, and has served as a Senior Vice President
of Brown & Root, Inc. and Weatherford International, Inc. B. F. Weatherly and
John S. Weatherly are brothers.
John S. Weatherly is Senior Vice President and Chief Financial Officer
for the Company and Callon Petroleum Operating. Prior to April 1999, Mr.
Weatherly also held the position of Treasurer. Prior to April 1996, he was Vice
President, Chief Financial Officer and Treasurer of the Company and had held
these positions since 1983. Prior to joining Callon Petroleum Operating in 1980,
he had been employed by Arthur Andersen LLP since 1974. Mr. Weatherly received
his B.B.A. degree in accounting in 1973 and his M.B.A. degree in 1974 from the
University of Mississippi. Mr. Weatherly is a member of the American Institute
of Certified Public Accountants and the Mississippi Society of Certified Public
Accountants. John S. Weatherly and B. F. Weatherly are brothers.
Richard O. Wilson is an Offshore Consultant. In his 47 years of working
in offshore drilling and construction, he spent two years with Zapata Offshore
and 21 years with Brown & Root, Inc. working in various managerial capacities in
the Gulf of Mexico, Venezuela, Trinidad, Brazil, the Netherlands, the United
Kingdom and Mexico. Mr. Wilson was a director and Senior Group Vice President of
Brown & Root, Inc. and Senior Vice President of Halliburton, Inc. For 18 years
he was associated with Fred. Olsen Interests where he served as Chairman of OGC
International PLC, Dolphin A/S and Dolphin Drilling Ltd. Since the sale of OGC
International PLC to Halliburton, Inc. in 1997, Mr. Wilson has been a consultant
to Brown & Root, Inc. He holds a B.S. degree in civil engineering from Rice
University. Mr. Wilson is a Fellow in the American Society of Civil Engineers,
is a member of the Institute of Petroleum, London, England, and a Director of
the Museum of Printing History in Houston, Texas. In 2000 Mr. Wilson was elected
an Industry Pioneer by the Offshore Energy Center, Houston, Texas.
Stephen F. Woodcock is Vice President of Exploration for the Company
and Callon Petroleum Operating. Prior to being appointed to this position in
November 1997, Mr. Woodcock had served as Manager of Geology and Geophysics
since his initial employment by the Company and Callon Petroleum Operating in
1995. Prior thereto, he was Manager of Geophysics for CNG Producing Company and
Division Geophysicist for Amoco Production Company. Mr. Woodcock received a
master's degree in geophysics from Oregon State University in 1975.
All officers and directors (including the Nominees) of the Company are
United States citizens, except Mr. Wallace, who is a citizen of Canada, and Mr.
Dons, who is a citizen of Norway.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and executive officers, and persons who own
more than ten percent of a registered class of the Company's equity securities,
to file with the Commission and any exchange or other system on which such
securities are traded or quoted, initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the Company.
Officers, directors and greater than ten percent shareholders are required by
the Commission's regulations to furnish the Company and any exchange or other
system on which such securities are traded or quoted, with copies of all Section
16(a) forms they file with the Commission.
8
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company during, or with respect to, the fiscal
year ended December 31, 2002, all of the Company's officers, directors and
greater than ten percent shareholders had complied with all Section 16(a) filing
requirements.
INFORMATION CONCERNING THE OPERATION OF THE BOARD OF DIRECTORS
The business of the Company is managed under the direction of the Board
of Directors. The Board of Directors meets on a quarterly basis to review
significant developments affecting the Company and to act on matters requiring
Board approval. The Board of Directors may also hold special meetings when an
important matter requires Board action between regularly scheduled meetings.
Each non-employee director receives an annual fee of $10,000 for service on the
Board of Directors and is reimbursed for out-of-pocket expenses incurred to
attend the Board meetings. In addition, effective January 1, 2002, each
non-employee director will receive $2,000 for each meeting of the Board attended
in person and $1,000 for his participation in each telephonic Board meeting. On
the date he or she is initially elected or appointed to the Board, each
non-employee director receives an annual automatic grant of an option to
purchase 5,000 shares of Common Stock for an exercise price equal to the fair
market price on the date of grant and for a ten-year term. Thereafter, for each
subsequent year in which the non-employee director is still serving as a
director, he or she will automatically be granted an option to purchase an
additional 5,000 shares on the same terms.
On August 23, 1996, the Compensation Committee authorized a one-time
grant to each non-employee director of an option to purchase 20,000 shares of
Common Stock under the 1996 Plan at a purchase price of $12.00 per share, the
fair market value of the Common Stock on such date. One-fourth of each option
vested at each succeeding annual meeting of directors following each annual
Shareholders' meeting, beginning with the 1997 Annual Meeting. On July 25, 2000,
the Compensation Committee authorized a one-time grant to each non-employee
director of an option to purchase 20,000 shares of Common Stock under the 1996
Plan at a purchase price of $10.50 per share, the fair market value of the
Common Stock on such date. One-fourth of each option vested on August 23, 2000
and the remaining options vested at each succeeding annual meeting of directors
following each annual Shareholders' meeting, beginning with the 2001 Annual
Meeting. On August 27, 2002, the Compensation Committee authorized the grant of
a total of 70,500 shares of restricted stock to the non-employee directors. The
restricted stock grant provided that the shares would vest with respect to
one-third of the shares on November 15, 2002, November 15, 2003 and November 15,
2004. The closing price of the Company's Common Stock on the New York Stock
Exchange was $3.72 per share on August 27, 2002.
During 2002, the Board of Directors of the Company met formally eight
times and executed eleven Unanimous Written Consents. Every director attended
all of the Board meetings held during 2002.
In order to facilitate the various functions of the Board of Directors,
the Board of Directors has created an Audit Committee and a Compensation
Committee. The Board of Directors does not have a Nominating Committee. The
functions customarily performed by a Nominating Committee are performed by the
entire Board of Directors. Committee members are not remunerated in addition to
their annual Board retainer.
AUDIT COMMITTEE. The Audit Committee monitors the Company's internal
accounting controls, reviews quarterly and annual financial information and
reviews the services and fees of the independent auditors. The Board of
Directors adopted an Audit Committee Charter in 2000. Members are Messrs. Robert
A. Stanger, Chairman, Richard O. Wilson, and John C. Wallace. All of the members
of the Audit Committee meet the New York Stock Exchange's independence
requirements. The Audit Committee held two meetings and executed one Unanimous
Written Consent during 2002. All members of the Audit Committee attended both
the meetings.
COMPENSATION COMMITTEE. The Compensation Committee establishes and
approves the terms of employment of senior executive officers and reviews and
approves management's recommendations concerning compensation of the other
executive officers and certain other employees. Members are Messrs. B. F.
Weatherly, Chairman, Robert A. Stanger, John C. Wallace and Richard O. Wilson.
The Compensation Committee held four meetings during 2002, and all members of
the Compensation Committee attended all meetings.
9
TRANSACTIONS WITH RELATED PERSONS
REGISTRATION RIGHTS. Members of the Callon family (including John S.
Callon and Fred L. Callon) are party to a Registration Rights Agreement dated
September 16, 1994 (the "Registration Rights Agreement"), pursuant to which they
are entitled to require the Company to register Common Stock owned by them with
the Commission for sale to the public in a firm commitment public offering and
generally to include shares owned by them in registration statements filed by
the Company. Ganger Rolf and Bonheur, as assignees of F.O. Energy, are parties
to a similar registration rights agreement.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors assists the Board in
overseeing the Company's accounting, auditing and financial reporting practices.
The Company's management has primary responsibility for preparing the Company's
financial statements and implementing its internal accounting controls. The
Audit Committee overseas these activities in order to ensure their quality and
integrity. The Audit Committee has reviewed the audited financial statements in
the Company's Annual Report for the year ended December 31, 2002 with
management. The Audit Committee's discussions with management included a review
of the quality, not just the acceptability, of the accounting principles used to
prepare, the reasonableness of significant judgments with respect to, and the
clarity of disclosures in the Company's financial statements.
On June 19, 2002, the Audit Committee recommended that the Board of
Directors remove Arthur Andersen LLP as the Company's independent auditors and
appoint Ernst & Young LLP as the independent auditors for examination of the
accounts and audit of the financial statements of the Company for the year
ending December 31, 2002. On that date, the Board of Directors executed a
Unanimous Written Consent to adopt the recommendation.
The Audit Committee reviewed the quality of the accounting principles
used in preparing the Company's financial statements with Ernst & Young LLP, the
independent auditors who are responsible for expressing an opinion on the
conformity of the Company's audited financial statements with generally accepted
accounting principles. The Audit Committee also discussed with Ernst & Young LLP
such other matters as are required to be discussed with its independent auditors
under generally accepted auditing standards, including Statement on Auditing
Standards No. 61 and other professional standards.
FEES PAID TO AUDIT FIRM. Fees paid for professional services rendered
in 2002 by Ernst & Young LLP for the annual audit and quarterly reviews were
$128,000 plus expenses of $6,250. Audit fees for professional services related
to year-end December 31, 2002 by Arthur Andersen LLP, the auditor prior to the
appointment of Ernst & Young LLP, were $40,500. Audit-related fees include
accounting consultation services, various attest services under professional
standards, assistance with registration statements, comfort letters and
consents. There were no financial information systems design and implementation
fees for either audit firm during 2002. During 2002 there were no other fees
paid to Ernst & Young LLP for audit-related fees or other fees. Other fees paid
for professional services rendered in 2002 by Arthur Andersen LLP, primarily
related to tax services, were $6,000.
After reviewing the non-audit services provided by Ernst & Young LLP
and engaging in discussions with Ernst & Young LLP regarding their independence,
the Audit Committee determined that the non-audit services provided to the
Company by Ernst & Young LLP were not inconsistent with Ernst & Young LLP's
status as independent auditors. The Audit Committee has received the written
disclosure and the letter from Ernst & Young LLP required by Independence
Standards Board Standard No. 1.
Based on its reviews of the Company's audited financial statements and
the discussions with management and Ernst & Young LLP discussed above, the Audit
Committee recommended to the Board of Directors that the Company's audited
financial statements be included in its Annual Report on Form 10-K for the year
ended December 31, 2002 for filing with the Commission.
Robert A. Stanger, Chairman
Richard O. Wilson
John C. Wallace
10
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information with respect to the Chief
Executive Officer of the Company and the four most highly compensated executive
officers of the Company ("Named Executive Officers") for the years ended
December 31, 2002, 2001 and 2000.
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------ --------------------------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING ALL OTHER
SALARY BONUS COMPENSATION AWARD(S) OPTIONS COMPENSATION
YEAR ($) ($)(a) ($)(b) ($)(c) (#)(d) ($)(e)
------ ----------- ---------- ------------ ------------ ------------- --------------
Fred L. Callon............ 2002 278,639 79,750 0 242,475 31,375 27,235
President and Chief 2001 271,843 0 0 0 0 31,117
Executive Officer 2000 262,650 211,000 0 0 110,000 30,189
Dennis W. Christian....... 2002 256,268 74,250 0 217,300 28,850 26,985
Sr. Vice President 2001 250,096 0 0 0 0 29,181
and Chief Operating 2000 241,638 195,000 0 0 65,000 28,328
Officer
John S. Weatherly......... 2002 222,911 64,250 0 197,425 25,000 25,146
Sr. Vice President 2001 217,474 0 0 0 0 25,944
and Chief Financial 2000 210,120 169,000 0 0 58,000 25,201
Officer
Kathy G. Tilley........... 2002 189,475 45,000 0 148,400 22,500 20,668
Vice President 2001 184,854 0 0 0 0 20,216
2000 178,602 135,000 0 0 48,000 19,528
Stephen F. Woodcock........ 2002 174,250 42,000 0 84,800 21,750 19,100
Vice President 2001 168,985 0 0 0 0 18,479
2000 151,497 100,000 0 0 44,000 16,562
--------------
(a) The 2002 bonus amounts were declared in February 2003 and were earned
by service performed during 2002. There were no bonuses declared in
February 2002 for service performed in 2001. The 2000 bonus amounts
were declared in February 2001 and earned by service during 2000.
Generally, bonus compensation is not payable unless the executive
remains employed by the Company through the date bonus compensation is
declared, which is generally in February or March of the following
year. These amounts also include amounts that were deferred at the
election of the Named Executive Officers.
(b) None of the Named Executive Officers received perquisites or other
personal benefits, securities or property, the aggregate annual amount
of which exceeded the lesser of $50,000 or 10% of the total of annual
salary and bonus reported for such officer.
(c) On February 14, 2002, the following shares of restricted stock were
awarded under the 1996 Plan: Fred L. Callon, 45,750 shares; Dennis W.
Christian, 41,000 shares; John S. Weatherly, 37,250 shares; Kathy G.
Tilley, 28,000 shares; and Stephen F. Woodcock, 16,000 shares. On
February 14, 2002 the closing price of the Company's Common Stock on
the New York Stock Exchange was $5.30 per share. Pursuant to the terms
of the restricted stock awards, the shares shall vest with respect to
one-third of the shares on November 15, 2002, with respect to an
additional one-third of the shares on November 15, 2003, and with
respect to the remaining one-third of the shares on November 15, 2004.
On November 14, 2002, the award was amended to provide that the vesting
date with respect to the shares not vested on that date would be
deferred for successive three-month periods unless the grantee provides
written notice to the Company of his or her desire to allow vesting. As
of November 15, 2002, no such written communication had been received
from any of the Named Executive Officers and therefore, one-third of
the award was deferred until February 15, 2003. As of December 31,
2002, Mr. Callon held 45,750 shares of unvested restricted stock with
an aggregate market value of $153,623, Mr. Christian held 41,000 shares
of unvested restricted stock with an aggregate market value of
$137,350, Mr. Weatherly held 37,250 shares of unvested restricted stock
with an aggregate market value of $124,788, Ms. Tilley held 28,000
shares of unvested restricted stock with an aggregate market value of
$93,800, and Mr. Woodcock held 16,000 shares of unvested restricted
stock with an aggregate market value of $53,600. The value of the
unvested restricted stock held by the Named
11
Executive Officers as of December 31, 2002 is based on the closing
price of the Company's Common Stock on the NYSE on such date, which was
$3.35 per share. Any dividends paid by the Company will be payable on
outstanding shares of restricted stock.
(d) On July 12, 2002 and August 23, 2002, options granted to Fred L. Callon
were 18,750 shares and 12,625 shares, respectively; Dennis W.
Christian, 17,250 shares and 11,600 shares, respectively; John S.
Weatherly, 15,000 shares and 10,000 shares, respectively; Kathy G.
Tilley, 13,500 shares and 9,000 shares, respectively; and Stephen F.
Woodcock, 13,250 shares and 8,500 shares, respectively. Options
exercise prices were $4.50 and $3.70 per share, respectively.
(e) Amounts reflect the Company's contribution in 2002, 2001, and 2000 of
$23,303, $27,185 and $26,265 to Fred L. Callon's 401(k) savings plan
and payment of $3,932, $3,932 and $3,924 term life insurance premiums;
$22,813, $25,009 and $24,164 to Mr. Christian's 401(k) savings plan and
payment of $4,172, $4,172 and $4,164 term life insurance premiums;
$20,949, $21,747 and $21,012 to Mr. Weatherly's 401(k) savings plan and
payment of $4,197, $4,197 and $4,189 term life insurance premiums;
$18,847, $18,484 and $17,860 to Ms. Tilley's 401(k) savings plan and
payment of $1,821, $1,732 and $1,668 term life insurance premiums; and
$17,425, $16,898 and $15,150 to Mr. Woodcock's 401(k) savings plan and
payments of $1,675, $1,581 and $1,412 term life insurance premiums.
EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
SEVERANCE COMPENSATION AGREEMENTS. Effective January 1, 2002, the
Company entered into Severance Compensation Agreements (the "Agreements") with
Fred L. Callon, Dennis W. Christian and John S. Weatherly providing for certain
benefits to each of them in the event that a "change of control" occurs during
the three-year period after the execution of such Agreements. Each Agreement is
for a three-year term and is automatically extended for successive one-year
periods unless either the Company or the executive notifies the other party
prior to such renewal that it has elected to terminate the Agreement; provided
that the term of each Agreement shall be until the later of two years following
the date of a change of control and the satisfaction of all obligations of the
Company under the Agreement. The Agreements terminate upon each executive's
death, disability termination for cause or voluntary resignation other than for
"good reason."
Pursuant to the Agreements, if either Messrs. Callon, Christian or
Weatherly's employment with the Company is terminated without cause by the
Company or for good reason by the executive within two years following a change
of control by the Company, the executive is entitled to a single lump-sum cash
payment in an amount equal to three times the sum of (a) the annual base salary
of such executive in effect prior to such termination, and (b) the higher of the
average bonus earned by the executive during the three preceding years or the
target bonus that the executive is eligible to receive during the year of
termination. If Messrs. Callon, Christian or Weatherly's employment is
terminated as a result of their death or disability, the Company is only
required to make such payments if the termination occurred within six months of
a change of control. "Good reason" is generally defined in the Agreements as a
change in the executive's compensation, benefits, position, responsibilities, or
location.
The Agreements also provide that, upon a change of control, all stock
options, restricted stock, stock appreciation rights and other similar rights
held by Messrs. Callon, Christian or Weatherly shall automatically become fully
exercisable notwithstanding any vesting or exercisability provisions.
If any payment to one of Messrs. Callon, Christian or Weatherly would
be subject to any excise tax under Section 4999 of the Internal Revenue Code of
1986, as amended, a "gross-up" payment will be made to place such executive in
the same net after-tax position as would have been the case if no excise tax had
been payable.
CONSULTING AGREEMENT. The Company entered into a consulting agreement
with John S. Callon, effective as of January 2, 1997, the day he retired as
Chief Executive Officer of the Company. The agreement was amended on February
18, 1999. Pursuant to the agreement, John S. Callon provided consulting services
to the Company on matters pertaining to corporate or financial strategy,
investor relations and public/private financing opportunities. The agreement
remained in effect from the effective date until December 31, 2001, subject to
renewal for succeeding five-year periods unless earlier terminated. As
compensation for his services under the agreement, John S. Callon was paid a fee
of not less than $190,000 per year increased annually based upon the change in
the Consumer Price Index, as adjusted for inflation. In addition, he will remain
eligible to participate in the Company's major medical and disability coverage,
and will be entitled to participate in all other employee benefit plans (other
than a cash bonus program) provided to full-time executives of the Company. As
an inducement for entering into the agreement, John S. Callon was granted 25,000
restricted shares of Common Stock, 20% of which were to vest on each of the
first five anniversaries following the effective date of the agreement. On
February
12
18, 1999, the Board of Directors approved the Compensation Committee's
recommendation that all unvested restricted shares be vested as of such date.
On January 1, 2002, the Company and Mr. Callon agreed to terminate the
consulting agreement upon the successful financing or refinancing of $45 million
of the Company's indebtedness. In July 2002, these conditions were met and a
$1.5 million, adjusted for inflation, termination payment was paid. The Company
remains obligated to continue to provide medical and disability coverage to Mr.
Callon and his spouse.
CHANGE IN CONTROL. Pursuant to the Callon Petroleum Company 1994 Stock
Incentive Plan (the "1994 Plan"), the Callon Petroleum Company 1996 Stock
Incentive Plan (the "1996 Plan"), and the Callon Petroleum Company 2002 Stock
Incentive Plan (the "2002 Plan"), in the case of a merger or consolidation where
the Company is not the surviving entity, or if the Company is about to sell or
otherwise dispose of substantially all of its assets while unvested options
remain outstanding, the Compensation Committee or other plan administrator may,
in its discretion and without Shareholder approval, declare some or all options
exercisable in full before or simultaneously with such merger, consolidation or
sale of assets without regard for prescribed waiting periods. Alternatively, the
Compensation Committee or other plan administrator may cancel all outstanding
options provided option holders are given notice and a period of 30 days prior
to the merger, consolidation or sale to exercise the options in full.
STOCK-BASED INCENTIVE COMPENSATION PLANS
The Company currently maintains three Common Stock-based incentive
plans for its directors and employees: the 1994 Plan, the 1996 Plan, and the
2002 Plan. The Company in the past has used and will continue to use stock
options, restricted stock, and performance share grants to attract and retain
key directors and employees in the belief that stock ownership and stock related
compensation devices encourage a continuity of interest between directors,
employees and Shareholders. The Compensation Committee of the Board of Directors
administers all three of the Stock Incentive Plans. Members of the Compensation
Committee currently are Messrs. B. F. Weatherly, as chairman; Stanger; Wallace;
and Wilson.
1994 PLAN. The 1994 Plan was adopted on June 30, 1994 and approved by
the Company's sole shareholder on that date. Pursuant to the 1994 Plan, 600,000
shares of Common Stock were reserved for issuance upon the exercise of options
or for grants of performance shares. No awards have been made under the 1994
Plan since 1999. As of March 21, 2003, there were 370 shares of Common Stock
available for grant under the 1994 Plan.
1996 PLAN. On August 23, 1996, the Board of Directors of the Company
approved and adopted the 1996 Plan and granted awards thereunder to various
employees. The 1996 Plan was approved by the Shareholders of the Company June
19, 1997. Pursuant to the 1996 Plan, 900,000 shares of Common Stock were
reserved for issuance upon the exercise of options or for grants of performance
shares. On August 20, 1998, the Board of Directors amended the 1996 Plan, as
permitted pursuant to the terms of the 1996 Plan, to increase the number of
shares of Common Stock reserved for issuance by 300,000 shares to 1,200,000
shares. On May 9, 2000, the Shareholders of the Company approved an increase in
the available number of shares of Common Stock reserved for issuance under the
1996 Plan by 1,000,000 shares to 2,200,000 shares. During 2000, the Compensation
Committee approved option grants for 788,000 shares to certain directors,
officers and employees. Automatic option grants to non-employee directors during
2001 were 30,000 shares. During 2002, the Compensation Committee approved option
grants for 139,000 shares to certain directors, officers and employees and
option grants totaling 120,000 shares were cancelled. Also in 2002, the
Compensations Committee approved grants of 168,000 shares of restricted stock to
certain officers and employees. As of March 21, 2003, there were 31,979 shares
of Common Stock available for grant under the 1996 Plan.
2002 PLAN. On February 14, 2002, the Board of Directors of the Company
approved and adopted the 2002 Plan. Pursuant to the 2002 Plan, 350,000 shares of
Common Stock shall be reserved for issuance upon the exercise of options or for
grants of stock options, stock appreciation rights or units, restricted stock,
or performance shares or units. This Plan qualifies as a "broadly based" plan
under the provisions of the New York Stock Exchanges' rules and regulations and
therefore did not require Shareholder approval. Because the 2002 Plan is a
broadly based plan, the aggregate number of shares underlying awards granted to
officers and directors cannot exceed 50% of the total number of shares
underlying the awards granted to all employees during any three-year period.
During 2002, the Compensation Committee authorized option grants for 171,000
shares and awarded 132,000 shares of restricted stock to certain directors,
officers and employees. Also during 2002, option grants totaling 2,250 shares
were cancelled, 2,000 shares of restricted stock were forfeited and 5,700 shares
of restricted stock were sold to satisfy federal and state
13
income tax liabilities. As of March 21, 2003, there were 69,598 shares of Common
Stock available for grant under the 2002 Plan
BONUS PLAN. In 1996, the Board of Directors authorized the
establishment of a cash bonus program (the "Bonus Plan") to be administered by
the Compensation Committee in accordance with formulas or procedures determined
by the Compensation Committee on an annual basis. Each year, the Compensation
Committee establishes target level bonuses as a percentage of base salary for
executive officers and certain other employees. The Compensation Committee also
establishes financial and operating goals to be achieved by the Company during
the year and assigns a relative weighting percent to each goal. Cash bonus
awards for the year are then based upon the extent to which such goals were
achieved during the year. See "--Report on Executive Compensation."
1997 EMPLOYEE STOCK PURCHASE PLAN. In 1997, the Board of Directors
authorized the implementation of the Callon Petroleum Company 1997 Employee
Stock Purchase Plan (the "1997 Purchase Plan"), which was approved by the
Company's Shareholders on June 19, 1997. The Plan provides eligible employees of
the Company with the opportunity to acquire a proprietary interest in the
Company through participation in a payroll deduction-based employee stock
purchase plan. An aggregate of 250,000 shares of Common Stock have been reserved
for issuance over the ten-year term of the 1997 Purchase Plan. The purchase
price per share at which Common Stock can be purchased by the participant on
each purchase date within an offering period is equal to eighty-five percent of
the fair market value per share of Common Stock.
OPTION GRANTS IN THE LAST FISCAL YEAR
The following table sets forth certain information concerning the
number and terms of options to purchase Common Stock granted during 2002 to the
Named Executive Officers. The options described below were granted on July 12,
2002 and August 23, 2002. The exercise price is $4.50 and $3.70 per share,
respectively, and is equal to the fair market value of the Common Stock at the
close of business on the day prior to grant date. The closing price of the
Common Stock on the New York Stock Exchange on March 21, 2003 was $3.95 per
share. Thirty-three and one-third percent of each grant will become vested and
exercisable on each anniversary following the grant date.
INDIVIDUAL OPTION GRANTS IN 2002
POTENTIAL
PERCENT REALIZABLE VALUE
NUMBER OF OF TOTAL AT ASSUMED ANNUAL
SECURITIES OPTIONS RATES OF STOCK
UNDERLYING GRANTED TO PRICE APPRECIATION
OPTIONS EMPLOYEES EXERCISE FOR OPTION TERM
GRANTED IN FISCAL PRICE
NAME (#) YEAR ($/SHARE) EXPIRATION DATE 5% ($) 10%($)
----------------------------- ----------- -------------- ----------- --------------------- ---------- ----------
Fred L. Callon................ 18,750 6.05% 4.50 July 12, 2012 53,063 134,472
12,625 4.07% 3.70 August 23, 2012 29,377 74,448
Dennis W. Christian........... 17,250 5.56% 4.50 July 12, 2012 48,818 123,714
11,600 3.74% 3.70 August 23, 2012 26,992 68,403
John S. Weatherly............. 15,000 4.84% 4.50 July 12, 2012 42,450 107,578
10,000 3.23% 3.70 August 23, 2012 23,269 58,968
Kathy G. Tilley............... 13,500 4.35% 4.50 July 12, 2012 38,205 96,820
9,000 2.90% 3.70 August 23, 2012 20,942 53,072
Stephen F. Woodcock........... 13,250 4.27% 4.50 July 12, 2012 37,498 95,027
8,500 2.74% 3.70 August 23, 2012 19,779 50,123
14
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth certain information concerning the
number and value of unexercised options to purchase Common Stock by the Named
Executive Officers at December 31, 2002. No stock options were exercised by such
persons in 2002.
AGGREGATED OPTION EXERCISES IN 2002 AND OPTION
VALUES AT DECEMBER 31, 2002
UNEXERCISED OPTIONS AT DECEMBER 31, 2002
------------------------------------------------
NUMBER OF VALUE OF
UNDERLYING IN-THE-MONEY
VALUE SECURITIES OPTIONS
SHARES ACQUIRED REALIZED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) ($) UNEXERCISABLE (a) UNEXERCISABLE ($)(b)
------------------------------ -------------------- ----------- ---------------------- ------------------------
Fred L. Callon................ 0 0 325,000 / 31,375 0 / 0
Dennis W. Christian........... 0 0 285,000 / 28,850 0 / 0
John S. Weatherly............. 0 0 259,000 / 25,000 0 / 0
Kathy G. Tilley............... 0 0 188,000 / 22,500 0 / 0
Stephen F. Woodcock........... 0 0 104,000 / 21,750 0 / 0
-----------
(a) Represents awards granted under the 1994 Plan, the 1996 Plan, and the
2002 Plan.
(b) On December 31, 2002, the closing price of the Common Stock on the New
York Stock Exchange was $3.35 per share.
LONG-TERM INCENTIVE PLAN AWARDS
Other than the 1994 Plan, the 1996 Plan, and the 2002 Plan, the Company
does not have a long-term incentive plan for its employees.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Company's Compensation Committee are Messrs. B. F.
Weatherly, Robert A. Stanger, John C. Wallace, and Richard O. Wilson, none of
whom are or have been officers or employees of the Company or had a relationship
requiring disclosure under this caption.
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is composed of four non-employee directors
who make recommendations to the Board with respect to the annual base and bonus
compensation of the executive officers of the Company. The Compensation
Committee also administers the Company's employee benefit plans.
COMPENSATION POLICY. The Company's goal with respect to its executive
compensation policy is to attract and retain executives who have the ability to
lead Callon in achieving its business objectives in a highly competitive
industry. To this end, the Company's compensation policy is comprised of three
elements: (1) base compensation, (2) bonus compensation, and (3) stock-based
compensation. Historically, the Company has provided for conservative base
salaries with more aggressive incentive compensation in order to emphasize pay
for performance. In addition, the Compensation Committee awards stock-based
compensation to encourage greater executive focus on shareholder value.
The Company does not have any employment agreements with its executive
officers at this time. However, the Compensation Committee believes that, in
order to retain highly qualified executives, it must provide these persons with
some security against organizational and personnel changes in the event of a
change of control of the Company. In order to provide this security, in early
2002, the Company entered into the Severance Compensation Agreements described
under "--Employment Agreements, Termination of Employment and Change of Control
Arrangements--Severance Compensation Agreements." The Compensation Committee
believes that these agreements are necessary to provide fair treatment to key
executives in the event of a change of control. In the future, the Compensation
Committee may determine that employment or other agreements with its executive
officers, in addition to the Severance Compensation Agreements, are necessary in
order to retain key employees and achieve the Company's long-term growth
objectives.
15
Currently, the Compensation Committee does not intend to award levels
of compensation that would result in a limitation on the deductibility of a
portion of such compensation for federal income tax purposes pursuant to Section
162(m) of the Internal Revenue Code of 1986, as amended; however, the
Compensation Committee may authorize compensation that results in such
limitations in the future if it determines that such compensation is in the best
interest of the Company.
BASE COMPENSATION. The Compensation Committee reviews each executive
officer's salary annually. The Compensation Committee has applied the same
principals to establish base compensation since the Company was formed in 1994,
taking into account both competitive realities and subjective factors. The base
compensation decision has no specific relationship to Company performance. As
its primary consideration, the Compensation Committee evaluates compensation set
for comparable positions by the Company's competitors, targeting the median of
such compensation. To determine base salaries paid by such peer group companies,
the Compensation Committee analyzes published industry survey data and proxy and
annual report information among energy companies of similar size, complexity and
activity. From time to time, the Company also engages independent compensation
consulting firms. With input from management of the Company, the Compensation
Committee also takes into account certain subjective factors such as individual
performance and contribution to the Company's success, seniority, experience
level, internal equities within the Company and general economic and industry
conditions. No specific weight, however, is assigned to these factors if they
are considered.
After reviewing the salary levels of the Company's peers, the Company
decided to increase the base salaries of the Company's executive officers for
2002 by 2.5%, representing a "cost of living" adjustment. In addition to
evaluating salary increases in the industry, the Compensation Committee also
took into account a subjective valuation of each individual officer's
contributions to the Company's performance in 2001, potential contributions
during 2002, and general inflationary considerations. This cost of living
increase was intended to match similar increases by the Company's competitors
and reflects the Compensation Committee's commitment to maintaining competitive
salary levels.
BONUS COMPENSATION. In 1996, the Board of Directors established the
Bonus Plan in order to tie compensation to certain fiscal targets affecting
short and long-term share price performance. Since that time, bonus compensation
has been awarded under the Bonus Plan as administered by the Compensation
Committee. As prescribed by the Bonus Plan, the Compensation Committee adheres
to a formal decision process for determining annual bonus compensation. At the
core of this process are pre-set financial and operating goals established by
the Compensation Committee as determinants of share price over time. For 2002,
the goals set were the successful financing or refinancing of $45 million of the
Company's indebtedness and the implementation of an acceptable business plan for
2002 and 2003.
Historically, the Compensation Committee has assigned a relative
weighting percent to each individual goal, evaluated the percentage by which
each individual goal was achieved, and derived a percentage of the total goal
achieved by adding together the percentage, based on relative weight, of each
individual goal achieved. The Compensation Committee also establishes target
level bonuses as a percentage of base salary for officers and other employees.
In the past, the amount of the target level bonus that was granted was based on
the percentage of the total goal achieved. The target level bonuses for 2002
were established at less than historical levels. However, unlike the financial
targets used as goals in prior years, the specific nature of the goals set for
2002 prevented an evaluation of the percentage of such goals achieved.
Therefore, the target level bonuses were awarded on an all or nothing basis for
2002. Since the goals set by the Compensation Committee were reached by Callon
in 2002, the target level bonuses were awarded.
STOCK-BASED COMPENSATION. The Company relies heavily upon stock options
to compensate executive officers. The Compensation Committee generally subjects
option grants to a vesting schedule and establishes the exercise price as the
fair market value (based on trading on the New York Stock Exchange) of the
Common Stock on the date of grant. The Compensation Committee believes that
these terms align the interests of the Company's executives with those of its
Shareholders.
To determine the timing and amount of stock-based awards, the
Compensation Committee considers the factors set forth under "Base Compensation"
above as well as the employee's ability to influence the Company's future
performance. The Compensation Committee also takes into account the number of
outstanding and unvested options held by an executive officer as well as the
size of previous option awards to such executive officer. As a result of the
contributions of the executive officers of the Company to the successful
financing of the Company's indebtedness and the implementation of an acceptable
business plan for 2002 and 2003, the Company awarded to executive officers and
certain
16
employees a total of 300,000 shares of restricted stock and granted options to
acquire a total of 265,000 shares during 2002.
In the past, the Compensation Committee has issued performance shares
to executive officers. There are no performance shares currently outstanding;
however, the Compensation Committee will continue to monitor the Company's
stock-based compensation program to determine if performance shares should be
granted in the future.
COMPENSATION OF CHIEF EXECUTIVE OFFICER. Mr. Callon's base salary was
increased by the Compensation Committee to $278,639 for 2002 as compared to
$271,843 for 2001 in order to keep Mr. Callon's salary level competitive with
the chief executive officer position at peer group companies as well as taking
into account the subjective factors described above under "Base Compensation."
See "Executive Compensation." In particular, the Compensation Committee
considered Mr. Callon's leadership role in overseeing the Company's successful
financing of the Company's indebtedness and the implementation of an acceptable
business plan for 2002 and 2003.
B. F. Weatherly, Chairman
Robert A. Stanger
John C. Wallace
Richard O. Wilson
17
PERFORMANCE GRAPH
The following graph compares the yearly percentage change for the five
years ended December 31, 2002, in the cumulative total shareholder return on the
Company's Common Stock against the cumulative total return for the (i) Media
General Financial Services Industry and Market Index of SIC Group 121 (the "MG
Group Index") consisting of independent oil and gas companies and (ii) the NYSE
Market Index.
COMPARISON OF 5-YEAR CUMMULATIVE TOTAL RETURN
AMONG CALLON PETROLEUM COMPANY, MG GROUP INDEX
AND THE NYSE MARKET INDEX (1)
[LINE GRAPH]
------------ ------------ ------------ ------------ ------------ -------------
12/31/1997 12/31/1998 12/31/1999 12/29/2000 12/31/2001 12/31/2002
------------------------------------- ------------ ------------ ------------ ------------ ------------ -------------
CALLON PETROLEUM COMPANY (2) $ 100 $ 71 $ 91 $ 103 $ 42 $ 21
------------------------------------- ------------ ------------ ------------ ------------ ------------ -------------
MG GROUP INDEX (2) $ 100 $ 65 $ 91 $ 132 $ 108 $ 113
------------------------------------- ------------ ------------ ------------ ------------ ------------ -------------
NYSE MARKET INDEX (2) $ 100 $ 119 $ 130 $ 133 $ 122 $ 99
------------------------------------- ------------ ------------ ------------ ------------ ------------ -------------
(1) The comparison of total return on an investment for each of the periods
assumes that $100 was invested on December 31, 1997 in the Company, the
MG Group Index and the NYSE Market Index, and that all dividends were
reinvested.
(2) The Company's Common Stock was traded on the Nasdaq NMS from September
19, 1994 until April 21, 1998. On April 22, 1998, the Company's Common
Stock began trading on the New York Stock Exchange.
18
PROPOSAL II
RATIFICATION OF APPOINTMENT OF
INDEPENDENT AUDITORS
CHANGE IN INDEPENDENT AUDITORS
On June 28, 2002, Arthur Andersen LLP was dismissed as independent
auditors for the Company effective upon the date Ernst & Young LLP was appointed
as the new independent auditors for the Company to replace Arthur Andersen LLP
for the year ending December 31, 2002. The decision to dismiss Arthur Andersen
LLP and to appoint Ernst & Young LLP was recommended by the Audit Committee of
the Company's Board of Directors at its meeting in June 2002, and was approved
by the Company's Board of Directors subject to the negotiation of a satisfactory
engagement letter with Ernst & Young LLP by the CFO of the Company. Such
successful negotiation of the engagement letter with Ernst & Young LLP was
completed on June 28, 2002.
Arthur Andersen LLP's report on the Company's financial statements for
the two fiscal years ended December 31, 2000 and December 31, 2001, did not
contain an adverse opinion or disclaimer of opinion and were not qualified or
modified as to uncertainty, audit scope or accounting principles.
During the Company's two most recent fiscal years and the period from
January 1, 2002 through June 28, 2002, there were no disagreements with Arthur
Andersen LLP on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements, if
not resolved to the satisfaction of Arthur Andersen LLP, would have caused it to
make reference to the subject matter of the disagreements in connection with its
report.
As required under the Commission regulations, the Company provided
Arthur Andersen LLP with a copy of this disclosure and requested that Arthur
Andersen LLP furnish the Company with a letter addressed to the Commission
stating whether it agrees with the statement by the Company in this disclosure
and, if not, stating the respects in which it does not agree. Arthur Andersen
LLP's letter is included as Exhibit 16.1 to the Company's Current Report on Form
8-K dated June 28, 2002 that has been filed with the Commission.
RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors has appointed Ernst & Young LLP, independent
auditors, for the examination of the accounts and audit of the financial
statements of the Company for the year ending December 31, 2003. At the Annual
Meeting, the Board of Directors will present a proposal to the Shareholders to
approve and ratify the engagement of Ernst & Young LLP. A representative of
Ernst & Young LLP will be present at the Annual Meeting and will have the
opportunity to make a statement, if he desires, and to respond to appropriate
questions.
Management recommends that the Shareholders approve and ratify the
appointment of Ernst & Young LLP as independent auditors of the Company for the
fiscal year ending December 31, 2003. Unless otherwise indicated, all properly
executed Proxies received by management will be voted for such ratification at
the Annual Meeting. An adverse vote will be considered as a direction to the
Audit Committee of the Board of Directors to select other auditors in the
following year.
SHAREHOLDERS' PROPOSALS
FOR 2004 ANNUAL MEETING
Shareholders who desire to present proposals at the 2004 Annual Meeting
of Shareholders and to have proposals included in the Company's proxy materials
must submit their proposals to the Company at its principal executive offices
not later than December 16, 2003. If the date of the 2004 Annual Meeting of
Shareholders is changed by more than 30 days from the date of the 2003 Annual
Meeting of Shareholders, the deadline for submitting proposals is a reasonable
time before the Company begins to print and mail its proxy materials for its
2004 Annual Meeting of Shareholders.
The persons named in the Company's form of proxy for the 2004 Annual
Meeting will have discretionary authority to vote any proxies they hold at such
meeting on any matter for which the Company does not receive notice by March 1,
2004, unless the Company changes the date of its 2004 Annual
19
Meeting of Shareholders by more than 30 days from the date of the 2003 Annual
Meeting of Shareholders, in which case such persons will be able to exercise
discretionary authority if notice of the matter has not been received in a
reasonable time before the Company mails its proxy materials for the 2004 Annual
Meeting of Shareholders.
If the date of the 2004 Annual Meeting of Shareholders is advanced or
delayed by more than 30 calendar days from the date of the 2003 Annual Meeting
of Shareholders, the Company shall, in a timely manner, inform Shareholders of
such change, by including a notice, under Item 5, in its earliest possible
quarterly report on Form 10-Q. The notice will include the new deadline for
submitting proposals to be included in the Company's proxy statement and the new
date for determining whether the Company may exercise discretionary voting
authority because it has not received timely notice of a matter.
In order to avoid controversy as to the date on which the Company
receives any such proposal, it is suggested that Shareholders submit their
proposals by certified mail, return receipt requested, or other means that
permit them to prove the date of delivery.
FINANCIAL STATEMENTS
Financial statements of the Company for its most recent fiscal year are
contained in the 2002 Annual Report and the Company's Report on Form 10-K.
COPIES OF THE COMPANY'S ANNUAL REPORT AND THE COMPANY'S REPORT ON FORM 10-K ARE
AVAILABLE TO SHAREHOLDERS UPON WRITTEN REQUEST TO THE INVESTOR RELATIONS
DEPARTMENT, CALLON PETROLEUM COMPANY, 200 NORTH CANAL STREET, NATCHEZ,
MISSISSIPPI 39120.
OTHER BUSINESS
The Board of Directors does not know of any matter to be acted upon at
the Annual Meeting other than those described above. If other business comes
before the Annual Meeting, the persons named on the Proxy will vote the Proxy in
accordance with what they consider to be in the best interests of the Company
and its Shareholders.
By order of the Board of Directors
/s/ Fred L. Callon
Fred L. Callon
President and Chief Executive Officer
Natchez, Mississippi
April 14, 2003
20
CALLON PETROLEUM COMPANY
200 NORTH CANAL STREET, NATCHEZ, MISSISSIPPI 39120
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE COMPANY FOR THE ANNUAL MEETING ON MAY 2, 2003
The undersigned hereby constitutes and appoints John S. Callon and Fred
L. Callon and each of them, his true and lawful agents and proxies with full
power of substitution in each, to represent and to vote, as designated on the
reverse, all of the shares of Common Stock of Callon Petroleum Company, held of
record by the undersigned on March 21, 2003, at the Annual Meeting of
Shareholders to be held in the St. Louis Room of the Natchez Convention Center,
211 Main Street, Natchez, Mississippi 39120 on May 2, 2003, and at any
adjournments thereof, on all matters coming before said meeting.
IF NO DIRECTION AS TO THE MANNER OF VOTING THIS PROXY IS MADE, THIS
PROXY WILL BE VOTED "FOR" THE ELECTION OF DIRECTORS AND "FOR" PROPOSAL 2 AS
INDICATED ON THE REVERSE SIDE HEREOF.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE
BOXES (SEE REVERSE SIDE) BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXIES CANNOT VOTE
YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
(Continued and to be signed on the reverse side)
ANNUAL MEETING OF SHAREHOLDERS OF
CALLON PETROLEUM COMPANY
MAY 2, 2003
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
* PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED. *
20230000000000000000 0 050203
------------------------------------------------------------------------------------------------------------------------------------
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 SHOW HERE [X]
------------------------------------------------------------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
1. Election of Directors: 2. To ratify the appointment of Ernst & Young LLP as [ ] [ ] [ ]
independent auditors.
NOMINEES:
[ ] FOR ALL NOMINEES [ ] Fred L. Callon 3. In their discretion, the Proxies are authorized to vote upon such
[ ] Dennis W. Christian Other business as may properly come before the meeting or
[ ] WITHHOLD AUTHORITY any adjournments thereof.
FOR ALL NOMINEES
THIS PROXY WHEN PROPERLY EXECUTED, WILL BE VOTED IN
[ ] FOR ALL EXCEPT THE MANNER DIRECTED HEREIN. IF NO DIRECTION IS MADE,
(SEE INSTRUCTIONS BELOW) THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF
DIRECTORS AND "FOR" PROPOSAL 2.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY IN THE STAMPED, PRE-ADDRESSED ENVELOPE
ENCLOSED.
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: [X]
--------------------------------------------------
--------------------------------------------------
To change the address on your account,
please check the box at right and indicate
your new address in the address space above. [ ]
Please note that changes to the registered
name(s) on the account may not be submitted
via this method.
--------------------------------------------------
Signature of Shareholder Date: Signature of Shareholder Date:
------------------------- ---------- ------------------------- ----------
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME OR NAMES APPEAR ON THIS PROXY. WHEN SHARES ARE HELD JOINTLY, EACH HOLDER SHOULD SIGN. WHEN
SIGNING AS EXECUTOR, ADMINISTRATOR, ATTORNEY, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF THE SIGNER IS A
CORPORATION, PLEASE SIGN FULL CORPORATE NAME BY DUTY AUTHORIZED OFFICER, GIVING FULL TITLE AS SUCH. IF SIGNER IS A
PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.