SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Amendment No. )
Filed by Registrant [x]
Filed by Party other than Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
COMSTOCK RESOURCES, INC.
(Name of Registrant as Specified in its Charter)
Comstock Resources, Inc.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[x] No fee required.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offering fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the
date of the filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
Preliminary Copy
COMSTOCK RESOURCES, INC.
5005 LBJ Freeway
Suite 1000
Dallas, Texas 75244
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 15, 1997
To the Stockholders of Comstock Resources, Inc.:
Notice is hereby given that the Annual Meeting of Stockholders of Comstock
Resources, Inc. will be held at the Westin Hotel at the Galleria, 13340 Dallas
Parkway, Dallas, Texas on May 15, 1997 at 9:00 A.M., Dallas time, for the
following purposes:
1. To elect one Class C director to serve a term of three years and until
his successor is duly elected and qualified;
2. To consider and act upon a proposal to amend the Company's Restated
Articles of Incorporation to increase the authorized common stock;
3. To ratify the appointment of Arthur Andersen LLP as independent public
accountants for 1997; and
4. To transact such other business as may properly come before the
meeting and any adjournment thereof.
The Board of Directors has fixed the close of business on April 11, 1997
as the record date for determining the stockholders entitled to notice of and to
vote at the meeting or any adjournment thereof. A list of such stockholders will
be open to examination of any stockholder at the Company's offices at 5005 LBJ
Freeway, Suite 1000, Dallas, Texas, 75244, during ordinary business hours, for a
period of at least ten days prior to the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/S/ROLAND O. BURNS
ROLAND O. BURNS
SECRETARY
Dallas, Texas,
April 15, 1997
IMPORTANT
TO ENSURE YOUR REPRESENTATION AT THE MEETING, PLEASE MARK, SIGN AND DATE THE
ENCLOSED PROXY AND RETURN IT AS PROMPTLY AS POSSIBLE IN THE ENCLOSED ENVELOPE.
NO POSTAGE NEED BE AFFIXED IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE
MEETING AND WISH TO VOTE IN PERSON, YOU MAY WITHDRAW YOUR PROXY.
Preliminary Copy
COMSTOCK RESOURCES, INC.
5005 LBJ Freeway
Suite 1000
Dallas, Texas 75244
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 15, 1997
The Board of Directors of Comstock Resources, Inc. (the "Company") hereby
solicits your proxy in the form enclosed for use at the Annual Meeting of
Stockholders (the "Annual Meeting") to be held at the Westin Hotel at the
Galleria, 13340 Dallas Parkway, Dallas, Texas, at 9:00 A.M., Dallas time, on May
15, 1997, or at any adjournment thereof. The expenses of this solicitation will
be borne by the Company. Proxies may be solicited by mail, personal interview,
telegram and telephone by directors, officers, employees and agents of the
Company without compensation.
This Proxy Statement and the accompanying form of proxy are being mailed to
stockholders on or about April 15, 1997. The principal executive office of the
Company is located at 5005 LBJ Freeway, Suite 1000, Dallas, Texas 75244,
telephone (972) 701-2000.
Only stockholders of record at the close of business on April 11, 1997 are
entitled to notice of and to vote at the Annual Meeting. On that date, there
were 24,175,203 shares of the Company's common stock, $.50 par value, (the
"Common Stock") outstanding. Included in the total outstanding shares are 23,358
shares reserved for conversion of shares which have not been tendered for
exchange subsequent to the Company's reincorporation in Nevada in 1981. Such
shares are not eligible to vote at the Annual Meeting. Holders of the Series
1995 Convertible Preferred Stock are entitled to vote on all matters on an as
converted basis or the equivalent of 1,345,377 shares of Common Stock.
Accordingly, the aggregate shares entitled to vote at the meeting are 25,497,222
shares. Each share is entitled to one vote.
You are encouraged to attend the Annual Meeting and vote in person.
Execution of the enclosed proxy will not in any way affect your right to do so.
A stockholder may revoke a proxy at any time prior to the voting thereof by
filing with the Secretary of the Company, prior to the stockholder vote, a
written revocation or duly executed form of proxy bearing a later date, or by
voting in person at the Annual Meeting.
Attendance at the Annual Meeting, either in person or by proxy, by the
record holders of a majority of the outstanding shares of the Common Stock
constitutes a quorum. Cumulative voting is not permitted.
1
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL HOLDERS
The following table sets forth certain information, as of April 15, 1997,
with respect to the beneficial ownership of Common Stock by (i) each executive
officer of the Company named in the Summary Compensation Table set forth in this
Proxy Statement, (ii) each director and each nominee for director of the
Company, (iii) all directors and executive officers of the Company as a group
and (iv) each person known by the Company to be the beneficial owner of 5% or
more of the Common Stock.
Name and Address of Beneficial Owner Shares (1)(2) Percent
---------------------------------------- -------------- --------
M. Jay Allison, President,
Chief Executive Officer and Director 949,034 3.81%
5005 LBJ Freeway, Suite 1000
Dallas, Texas 75244
Roland O. Burns, Senior Vice President, 195,250 *
Chief Financial Officer, Treasurer
and Secretary
Richard S. Hickok, Director 97,270(3) *
Franklin B. Leonard, Director 131,480 *
Harold R. Logan, Retiring Director 117,326 *
Cecil E. Martin, Jr., Director 360,702(4) 1.49%
James L. Menke, Vice President of Operations 62,500 *
David W. Sledge, Director 28,183 *
All Directors and Executive Officers
as a Group (8 persons) 1,941,745 7.64%
The TCW Group, Inc. (5) 1,345,377(6) 5.27%
865 South Figueroa Street
Los Angeles, California 90017
_____________________________
* Indicates less than 1%.
(1) Unless otherwise indicated, all shares of Common Stock are held
directly with sole voting and investment powers.
(2) Includes shares issuable pursuant to stock options which are presently
exercisable or exercisable within 60 days of April 15, 1997, in the
following amounts: Mr. Allison - 755,000 shares; Mr. Burns - 160,000
shares; Mr. Hickok - 41,500 shares; Mr. Leonard - 50,500 shares; Mr.
Logan - 50,500 shares; Mr. Martin - 84,375 shares; Mr. Menke - 62,500
shares; and Mr. Sledge - 20,000 shares.
(3) Includes 32,572 shares held by a corporation owned 90% by Mr. Hickok's
wife and 10% by Mr. Hickok's children.
(4) Includes 135,632 shares and options to purchase 30,800 shares held by
Mr. Martin's wife as trustee on behalf of family trusts.
(5) The TCW Group, Inc. is the parent of the trustee, general partner or
investment manager for the following beneficial owners: TCW Debt and
Royalty Fund IVA - 99,827 shares; TCW Debt and Royalty Fund IVB -
266,707 shares; TCW Debt and Royalty Fund IVC - 115,230 shares; Delta
Master Trust - 66,552 shares; The Leland Stanford Junior University -
166,379 shares; Searle Trusts Limited Partnership X - 83,189 shares;
John G. Searle Charitable Trusts Partnership - 33,276 shares; The City
and County Employees Retirement System of San Francisco - 38,027
shares; and General Mills, Inc. - 476,190 shares. The information
herein is based on the Schedule 13G filing dated February 9, 1997 by
The TCW Group, Inc.
(6) Includes 1,345,377 shares issuable upon conversion of 706,323 shares of
the Series 1995 Convertible Preferred Stock.
2
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's Board of Directors presently consists of six members
comprised of three classes (Class A, B, and C). Directors are elected in classes
to serve terms of three years. The Class C directors (whose term expires at the
Annual Meeting) are Richard S. Hickok and Harold R. Logan. The Class A
directors, whose term expires in 1998, are Franklin B. Leonard and Cecil E.
Martin, Jr. The Class B directors whose term expires in 1999 are M. Jay Allison
and David W. Sledge. At the Annual Meeting, one Class C director will be
elected, for a term of three years beginning in 1997 and until his successor is
duly elected and qualified. The Company has decided to reduce the Board of
Directors to five members rather than filling the position created by Mr.
Logan's retirement. The Board of Directors has nominated Richard S. Hickok to
serve as the Class C director. Further information with respect to the nominee
and the other directors continuing in office is set forth below.
Nominee for Three-Year Term
RICHARD S. HICKOK, (71) Director
Mr. Hickok has been a director of the Company since 1987. From 1948 to 1983,
he was employed by the international accounting firm of Main Hurdman where he
retired as Chairman of the Board of Directors. From 1978 to 1980, Mr. Hickok
served as a Trustee of the Financial Accounting Foundation and has extensive
involvement serving on various committees of the American Institute of Certified
Public Accountants. He currently serves as a director of Marsh & McLennan
Company, Inc., Alpine Lace Brands, Inc., Marcam, Inc. and Projectavision, Inc.
Mr. Hickok holds a B.S. degree from the Wharton School of the University of
Pennsylvania.
Directors Continuing in Office
M. JAY ALLISON, (41) President, Chief Executive Officer and Director
Mr. Allison has been a director of the Company since 1987, and President and
Chief Executive Officer of the Company since 1988. From 1987 to 1988, Mr.
Allison served as Vice President and Secretary of the Company. From 1981 to
1987, he was a practicing oil and gas attorney with the firm of Lynch, Chappell
& Alsup in Midland, Texas. In 1983, Mr. Allison co-founded a private independent
oil and gas company, Midwood Petroleum, Inc., which was active in the
acquisition and development of oil and gas properties from 1983 to 1987. He
received B.B.A., M.S. and J.D. degrees from Baylor University in 1978, 1980 and
1981, respectively. Mr. Allison currently serves on the Board of Trustees of
Howard Payne University.
FRANKLIN B. LEONARD, (69) Director
Mr. Leonard has been a director of the Company since 1960. From 1961 to 1994,
Mr. Leonard served as President of Crossley Surveys, Inc., a New York based
company which conducted statistical surveys. Mr. Leonard's family's involvement
in the Company spans four generations dating back to the 1880's when Mr.
Leonard's great grandfather was a significant stockholder of the Company. Mr.
Leonard also served as a director of Glen Ridge Savings and Loan Association
from 1968 to 1990. Mr. Leonard holds a B.S. degree from Yale University.
3
CECIL E. MARTIN, JR., (55) Director
Mr. Martin has been a director of the Company since 1988. Mr. Martin has been
a significant investor in the Company since 1987. From 1973 to 1991 he served as
Chairman of a public accounting firm in Richmond, Virginia. Mr. Martin also
serves as a director for Ten-Key, Inc. Mr. Martin holds a B.B.A. degree from Old
Dominion University and is a Certified Public Accountant.
DAVID W. SLEDGE, (40) Director
Mr. Sledge has been a director of the Company since 1996. Mr. Sledge served
as President of Gene Sledge Drilling Corporation, a privately held contract
drilling company based in Midland, Texas until its sale in October 1996. Mr.
Sledge served Gene Sledge Drilling Corporation in various capacities from 1979
to 1996. Mr. Sledge is director of the International Association of Drilling
Contractors and is a past chairman of the Permian Basin chapter of this
association. He received a B.B.A. degree from Baylor University in 1979.
There are no family relationships among any of the officers or directors of
the Company.
Meetings of the Board of Directors and Committees
During 1996, the Board of Directors held eleven meetings, and each Director
participated in at least 75% of the meetings held.
The Company's Audit Committee has responsibility for recommending retention
or change of the Company's independent auditors, reviewing with management and
the independent auditors the Company's financial statements, accounting and
financial policies and practices, audit scope and adequacy of the Company's
internal control structure. The Audit Committee consists of Richard S. Hickok as
Chairman, and Franklin B. Leonard and David W. Sledge, as members. The Audit
Committee held two meetings during 1996 at which all members were present. In
addition, the Company's Senior Vice President, as well as the Company's
independent public accountants, consult regularly with the Audit Committee on an
informal basis to discuss various accounting related issues.
The Company's Executive Committee is authorized to act and acts during the
intervals between the meetings of the Board of Directors and has all of the
powers and authority of the Board of Directors in the management of the business
and affairs of the Company, except the power to declare dividends; to adopt,
amend or repeal bylaws; to adopt an agreement of merger or consolidation; to
sell substantially all of the Company's assets; to recommend a dissolution of
the Company to the stockholders; or to authorize the issuance of stock of the
Company. The Executive Committee consists of M. Jay Allison as Chairman, and
Cecil E. Martin, Jr. and Harold R. Logan as members. The Executive Committee
held two meetings during 1996 at which all members were present.
4
The Company's Compensation Committee reviews and recommends to the Board of
Directors the compensation and promotion of officers of the Company, the terms
of any proposed employee benefit arrangements and the making of awards under
such arrangements. The Compensation Committee consists of Cecil E. Martin, Jr.,
as Chairman, Harold R. Logan and David W. Sledge as members. The Compensation
Committee held two meetings during 1996 at which all members were present.
The Company has not established a formal nominating committee and presently
the full Board of Directors considers director nominations.
Compensation of Directors
The Company pays annual fees to directors who are not employees of the
Company and reimburses such directors for expenses in attending meetings. The
Company pays an annual fee of $23,000 to the Chairman of the Board of Directors,
an annual fee of $21,000 to directors who chair committees, and an annual fee of
$18,000 to the remaining directors. The Company also pays Mr. Logan and Mr.
Martin for additional services provided to the Company under consulting
agreements which provide for annual payments of $24,000 and $18,000,
respectively. Under a plan established by the Board of Directors, each director
can make an annual election to receive his director and consulting fees in cash
or in the equivalent number of shares of Common Stock at the then current market
price of Common Stock. In January 1996 the Company issued 29,714 shares of
Common Stock, at its then current market value of $4.8125 per share, to the
non-employee directors in full payment of director fees for 1996 aggregating
$101,000 and for amounts due to Mr. Logan and Mr. Martin under the consulting
agreements aggregating $42,000. In May 1996, the Company issued shares of Common
Stock, at its then current market value of $6.5625 per share, to Mr. Sledge in
payment of director fees for 1996 of $11,250.
Under the Company' 1991 Long-term Incentive Plan, each non-employee
director receives on the date of initial election or appointment to the Board of
Directors options to acquire 10,000 shares of Common Stock. In addition, each
non-employee director receives at each annual meeting of stockholders so long as
such person remains a director options to acquire 10,000 shares of Common Stock.
The exercise price equals the fair market value on the date of grant.
Under Nevada law, directors will be elected by a plurality vote and the
person receiving the greatest number of votes will be elected as the Class C
Director.
Shares represented by proxies will be voted FOR the election of the Board
of Directors' nominee unless otherwise indicated on the proxy. If at the time of
the meeting, the nominee has become unavailable for any reason, the persons
entitled to vote the proxy shall vote for such substitute nominee as they, in
their discretion, may determine. The Company knows of no reason why the nominee
would be unavailable to serve.
The Board of Directors recommends that the Stockholders vote FOR the
election of the nominee.
5
EXECUTIVE COMPENSATION
The following graph compares the yearly percentage change in the cumulative
total stockholder return on the Company's Common Stock during the five years
ended December 31, 1996 with the cumulative return on the Nasdaq Stock Market
Index and an index composed of all publicly traded oil and gas companies within
SIC Code 1311, consisting of 183 companies. The graph assumes that $100 was
invested in each category on the last trading day of 1991 and that dividends, if
any, were reinvested. On December 17, 1996, the Company's Common Stock was
listed for trading on the New York Stock Exchange.
Stock Performance Graph
[GRAPHIC OMITTED]
Value of $100 Investment:
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
The Company $ 158 $ 258 $ 279 $ 474 $1,095
Industry Index 95 113 119 130 173
Nasdaq Market Index 101 121 127 165 205
6
The following table sets forth certain information regarding compensation
earned during each of the Company's last three fiscal years by the Company's
Chief Executive Officer and the other executive officers of the Company.
Summary Compensation Table
Long-Term
Compensation
Name and Principal Annual Compensation Option
Position Year Salary Bonus Other(1)(2) Awards
-------- ---- ------ ----- ----------- ------
M. Jay Allison, 1996 $ 245,000 $ 350,000 $ 2,250 1,165,000
President and Chief 1995 245,000 155,000 3,200 50,000
Executive Officer 1994 241,500 130,000 -- --
Roland O. Burns, 1996 132,000 85,000 2,250 292,500
Sr. Vice President and 1995 128,000 40,000 1,909 22,500
Chief Financial Officer 1994 123,500 30,000 -- --
James L. Menke, 1996 93,200 50,000 2,250 102,500
Vice President of 1995 90,000 30,000 1,331 10,000
Operations (3) 1994 59,924 15,000 -- --
(1) The value of all perquisites provided to each executive officer by the
Company did not exceed the lesser of $50,000 or 10% of such officer's
salary and bonus for the year.
(2) Represents the Company's matching contributions under the Company's
401(k) Profit Sharing Plan.
(3) Mr. Menke was elected Vice President of Operations on March 21, 1994.
The following table sets forth certain information with respect to the
value of the named executive officers' option exercises in 1996 and unexercised
options at December 31, 1996.
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options
Acquired on Value Options at Fiscal Year-End at Fiscal Year-End(1)
Name Exercise Received Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
M. Jay Allison -- -- 670,000 910,000 $6,231,638 $2,045,000
Roland O. Burns 14,250 $ 133,594 140,000 240,000 1,241,819 660,000
James L. Menke -- -- 55,000 57,500 442,263 115,000
(1) The last sale price for a share of Common Stock as reported by the New
York Stock Exchange on December 31, 1996 was $13.00 and the exercise
prices of the options in this table ranged from $2.00 to $11.00 per
share.
7
The following table sets forth certain information regarding stock options
granted during 1996 to the named executive officers of the Company.
Number of Percent of
Securities Total Options
Underlying Granted To Exercise or Grant Date
Options Employees in Base Price Expiration Present
Name Granted Fiscal Year Per Share Date Value (1)
---- ------- ----------- --------- ---- ---------
M. Jay Allison 155,000 48% $4.81 August 1, 2001 $ 399,900
125,000 63 6.56 December 1, 2001 462,500
85,000 67 11.00 April 1, 2002 646,000
800,000 67 11.00 January 1, 2006 6,080,000
--------- ----------
1,165,000 63 $7,588,400
--------- ----------
Roland O. Burns 40,000 12% $4.81 August 1, 2001 $ 103,200
32,500 16 6.56 December 1, 2001 120,250
20,000 16 11.00 April 1, 2002 152,000
200,000 17 11.00 January 1, 2006 1,520,000
--------- ----------
292,500 16 $1,895,450
--------- ----------
James L. Menke 30,000 9% $4.81 August 1, 2001 $ 77,400
15,000 8 6.56 December 1, 2001 55,500
7,500 6 11.00 April 1, 2002 57,000
50,000 4 11.00 January 1, 2006 380,000
--------- ----------
102,500 6 $ 569,900
--------- ----------
(1) Grant Date Value is based on the Black-Scholes option pricing model
with the following weighted average assumptions for the grants made in
1996: no dividend yield; expected volatility of 54.1%; expected
exercise at the end of the option exercise period; and risk free
interest rate of 6.3%.
Employment Agreements
Effective July 1, 1996, the Company entered into employment agreements with
M. Jay Allison, the President and Chief Executive Officer of the Company, and
Roland O. Burns, Senior Vice President, Chief Financial Officer, Secretary and
Treasurer of the Company. Under the agreements, the Company agreed to employ
each of Mr. Allison and Mr. Burns for a period of 12 months at a minimum base
rate of $245,000, and $132,500 per annum, respectively. Each of the agreements
provides for the payment of severance benefits in an amount equal to three times
the existing annual base salary of the employee upon (i) a change in control
followed by (ii) the occurrence of certain specified events, including the
assignment of the employee to duties inconsistent with his position immediately
prior to the change in control, a reduction in the employee's salary, requiring
the employee to be relocated, failure of a successor to the Company to assume
the obligations of the Company under the agreement, failure of the Company to
re-elect the employee to the offices held by him immediately prior to a change
in control and a breach by the Company (or any successor) of any provisions of
the agreement. The severance benefit payments are payable in cash in equal
payments (without interest over a period not to exceed 12 months). As defined in
the agreements, a "change in control" is deemed to have taken place if (a)
without the approval or recommendation of a majority of the then existing Board
of Directors of the Company, a third person causes or brings about the removal
or resignation of a majority of the then existing members of the Board or if a
third person causes or brings about an increase in the size of the Board such
that the then existing members of the Board thereafter represent a minority
8
of the total number of persons comprising the entire Board; (b) a third person,
including a group, becomes the beneficial owner of shares of any class of the
Company's stock having 30% or more of the total number of votes that may be cast
for the election of directors of the Company; (c) any shares or any class of the
Company's stock are purchased pursuant to a tender or exchange offer (other than
an offer by the Company); or (d) the Company's stockholders approve a merger or
other business combination of the Company with or into another corporation
pursuant to which the Company will not survive or will survive only as a
subsidiary of another corporation, or the sale or other disposition of all or
substantially all of the assets of the Company, or any combination of the
foregoing.
Report of Compensation Committee on Executive Compensation
The duties of the Company's Compensation Committee include the annual
review and approval of the Company's management compensation strategy, review
and determination of individual elements of compensation for the Company's
executive officers and oversight of the administration of the Company's 1991
Long-term Incentive Plan (the "Incentive Plan"). The Compensation Committee has
not established any specific criteria in determining executive compensation. The
goal of the Company's compensation arrangements is to attract, retain and reward
personnel critical to the long-term success of the Company. To achieve this
basic goal, the Compensation Committee sets annual base salaries for the chief
executive officer and the other executive officers and awards discretionary cash
bonuses based on the Company's financial performance during the prior year, as
well as the Compensation Committee's subjective assessment of an individual's
own performance and ability in the position held by that person.
Base Salaries. The Company's compensation policy is for the Compensation
Committee to annually review and set executive base salaries, including that of
the President and Chief Executive Officer, within a competitive range given the
Company's growth strategy. Once generally established, base salaries are
adjusted within the competitive range on an individual basis based on past
performance. In 1996, the Compensation Committee did not increase Mr. Allison's
base salary. The Committee approved increases of 3.5% to the base salaries of
Mr. Burns and Mr. Menke.
Discretionary Cash Bonuses. The Compensation Committee awarded cash bonuses of
$485,000 in the aggregate to three executive officers for 1996, including
$350,000 to Mr. Allison, for their performance with respect to the Company's
achievements in 1996 including completing $100 million in property acquisitions
and implementing a successful development drilling program. These achievements,
in the opinion of the Committee, substantially enhanced the long-term business
and financial prospects of the Company,which was reflected in the performance of
the Company's stock price in 1996. The amount of each bonus was determined based
upon the Compensation Committee's subjective assessment of the contribution of
each executive officer. With respect to Mr. Allison, the Compensation Committee
primarily considered his role and performance in directing the Company's growth
and results in 1996.
Incentive Plan Awards. The Compensation Committee believes that a significant
portion of executive compensation should be dependent on value created for the
Company's stockholders. Through the Incentive Plan, stock options are granted to
key management to align the interests of management with the interests of
stockholders in working to increase the value of the Company's Common Stock. In
May and September 1996, the Compensation Committee granted options under the
Incentive Plan to purchase 1,526,500 shares of Common Stock, at exercise prices
ranging from of $6.56 to $11.00 per share, to the Company's executive officers
and certain other key members of management. Of the options granted, options to
purchase 1,355,000 shares of Common Stock were granted to executive officers and
options to purchase 191,500 shares of Common Stock were granted to other key
9
employees. Of the options granted to executive officers, options to purchase
1,010,000 shares of Common Stock were granted to Mr. Allison. Both the size of
grants and the proportion relative to the total number of option shares granted
generally increased as a function of the recipient's higher level of
responsibility within the Company and individual performance. The factors upon
which the Committee granted options, including the grants to Mr. Allison, were
the same as those considered in awarding discretionary cash bonuses.
The Compensation Committee
Cecil E. Martin, Jr., Chairman
Harold R. Logan
David W. Sledge
PROPOSAL NO. 2
INCREASE IN AUTHORIZED COMMON STOCK
The Board of Directors has determined that it is advisable to amend Article
Fourth of the Company's Restated Articles of Incorporation to increase the
authorized Common Stock from 30,000,000 shares to 50,000,000 shares. The text of
the proposed Article fourth is as follows:
"FOURTH: That the amount of the total of the authorized capital stock
of the corporation is Fifty-five Million (55,000,000) shares of which Fifty
Million (50,000,000) shares are Common Stock, Fifty Cents ($.50) par value
per share, and Five Million (5,000,000) shares are Preferred Stock, Ten
Dollars ($10.00) par value per share. The shares of Common Stock shall be
identical in all respects and shall have one vote per share on all matters
on which stockholders are entitled to vote. The Preferred Stock may be
issued in one or more series; shares of each series shall be identical in
all respects and shall have such voting, dividend, conversion and other
rights, and such preferences and privileges as may be determined by
resolution of the Board of Directors of the Corporation."
The Articles of Incorporation currently authorizes the Company to issue
30,000,000 shares of Common Stock and 5,000,000 shares of preferred stock. As of
April 11, 1997, there were 24,175,203 shares of Common Stock issued and
outstanding and 706,323 shares of preferred stock issued and outstanding.
Except for 3,653,104 shares of Common Stock issuable under the Incentive
Plan, the reservation of 243,530 shares for other options and warrants to
purchase Common Stock, and the reservation of 1,345,377 shares of Common Stock
for the conversion of the Series 1995 Convertible Preferred Stock, the Company
has no specific plans or commitments for the issuance of the proposed additional
shares of Common Stock. The Board of Directors believes that the increase in
authorized Common Stock is necessary and desirable for future acquisitions,
stock splits, stock distributions, and grants under employee benefit plans. In
addition, the Company would possess greater flexibility to take advantage of
potential acquisition and financing opportunities. The additional shares would
be available for issuance by the Board of Directors without further stockholder
action except as require by law or applicable stock exchange requirements.
10
The additional shares, upon issuance, would have the same voting and other
rights as presently authorized shares of Common Stock. The holders of Common
Stock do not have preemptive rights to subscribe for additional shares of Common
Stock.
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock entitled to vote at the Annual Meeting is necessary for approval
of the amendment to the Restated Articles of Incorporation.
The Board of Directors recommends that the stockholders vote FOR the
amendment to the Restated Articles of Incorporation to increase the authorized
Common Stock of the Company. Proxies solicited by the Board of Directors will be
so voted unless stockholders specify otherwise in their proxies.
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon the recommendation of the Audit Committee, has
appointed Arthur Andersen LLP as independent public accountants to audit the
consolidated financial statements of the Company for 1997. Stockholders are
being asked to ratify this appointment. Arthur Andersen LLP has served the
Company in this capacity since 1989. Representatives of Arthur Andersen LLP are
expected to be present at the Annual Meeting and will have the opportunity to
make a statement if they desire to do so, and will be available to respond to
appropriate questions.
The affirmative vote of the holders of a majority of the shares of Common
Stock present or represented and entitled to vote at the Annual Meeting is
necessary for ratification of the appointment of the independent accountants.
The Board of Directors recommends that stockholders vote FOR such
ratification. Proxies solicited by the Board of Directors will be so voted
unless stockholders specify otherwise in their proxies.
With regard to the election of directors, votes may be cast in favor or
withheld; votes that are withheld will be excluded entirely from the vote and
will have no effect. Abstentions may be specified on all proposals (but not on
the election of directors) and will be counted as present for purposes of the
item on which the abstention is noted. Since the amendment to the Restated
Articles of Incorporation requires the approval of a majority of the outstanding
shares, abstentions will have the effect of a negative vote. Under the rules of
the New York Stock Exchange, Inc. ("NYSE"), brokers who hold shares in street
name for customers have the authority to vote on certain items when they have
not received instructions from beneficial owners. Brokers that do not receive
instructions are entitled to vote on the election of directors, the amendment to
the Restated Articles of Incorporation and the ratification of accountants.
Under applicable Nevada law, a broker non-vote will have the same effect as a
vote against the proposed amendment to the Restated Articles of Incorporation,
and will have no effect on the outcome of the election of directors or the
ratification of accountants.
11
CERTAIN TRANSACTIONS
The Company serves as general partner of Comstock DR-II Oil & Gas
Acquisition Limited Partnership ("DR-II"). In 1996 the Company received $87,000
in management fees and had a receivable from DR-II of approximately $93,000 at
December 31, 1996. TCW is a investment manager for certain investors which have
an interest in DR-II.
STOCKHOLDER PROPOSALS
Any proposal which a stockholder intends to present at the Company's annual
meeting of stockholders in 1998 must be received by the Company by December 16,
1997, in order to be eligible for inclusion in the proxy statement and form of
proxy relating to such meeting.
ANNUAL REPORT
The Company's 1996 Annual Report to Stockholders (including its Annual
Report on Form 10-K for the fiscal year ended December 31, 1996) is being mailed
to stockholders of record together herewith.
OTHER BUSINESS
The Board of Directors is not aware of any matters other than those set
forth above which will be presented for action by the stockholders at the Annual
Meeting, but if any other matters should be presented, the persons named in the
proxy intend to vote such proxies in accordance with their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ROLAND O. BURNS
ROLAND O. BURNS
SECRETARY
Dallas, Texas
April 15, 1997
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FORM OF PROXY - PRELIMINARY COPY
X PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
WITHHOLD AUTHORITY
to vote for Nominee:
FOR nominee listed Richard S. Hickok
1. Proposal to elect
one (1) Class C
Director
(term expires ------ ------
in 2000):
Instruction: (To withhold authority to vote for the individual nominee,
write that nominee's name on the line below.)
FOR AGAINST ABSTAIN
2. Proposal to amend the
Restated Articles of
Incorporation. ------ ------ ------
3. Proposal to ratify
the appointment of
Arthur Andersen LLP
as independent
public accountants
for 1997. ------ ------ ------
4. In their discretion
on such other matters
properly come before
the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1,2 AND 3.
SIGNATURE(S) ------------------------------ DATE ---------
NOTE: Please sign exactly as your name appears on the proxy. If your stock is
jointly owned, both parties must sign. Fiduciaries and representatives should so
indicate when signing, and when more than one is named, a majority should sign.
