SCHEDULE
14C
(RULE
14C-101)
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SCHEDULE
C INFORMATION
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GULFPORT
ENERGY CORPORATION |
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(Name
of Registrant as Specified in Its Charter) |
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GULFPORT
ENERGY CORPORATION
14313
N. MAY AVENUE, SUITE 100
OKLAHOMA
CITY, OKLAHOMA 73134
________________________________________
NOTICE
OF ACTION WITHOUT A MEETING IN LIEU OF AN ANNUAL MEETING
________________________________________
To the
Stockholders of
Gulfport
Energy Corporation:
This
Information Statement is being furnished on or about April 29, 2005 by Gulfport
Energy Corporation, a Delaware corporation (the “Company”), to holders of the
Company’s outstanding common stock as of the record date, March 31, 2005 (the
“Record Date”), pursuant to Rule 14c-2 under the Securities Exchange Act of
1934, as amended (the “Exchange Act”). The purpose of this Information Statement
is:
(1)
to inform the Company’s stockholders that the five directors nominated by the
Company’s Board of Directors have been elected by the written consent of a
majority of the Company’s outstanding voting shares that are entitled to vote on
these matters; and
(2)
to serve as notice of the foregoing actions in accordance with
Section 228(e) of the Delaware General Corporation Law.
On March
31, 2005, the Board of Directors nominated five persons to serve on the Board of
Directors of the Company until the next annual meeting of stockholders or until
their successors are duly elected and qualified or until each such director’s
earlier resignation or removal.
March 31,
2005 is the Record Date for the determination of the Company stockholders
entitled to receive this Information Statement. The Company had 31,883,188
shares of common stock outstanding as of the Record Date. Each share of common
stock entitles the holder thereof to one vote on matters submitted to the
stockholders.
Under
Delaware law and the Company’s bylaws, director nominees are elected by a
plurality of all of the votes cast. On April 15, 2005, in accordance with
Delaware law and the Company’s bylaws, the holders of a majority of the
outstanding shares of the Company’s Common Stock executed a written consent
electing the five director nominees to hold office for a term of one year until
the annual meeting of stockholders in 2006 and until their respective successors
are duly elected and qualified. ACCORDINGLY,
WE ARE NOT ASKING YOU FOR A PROXY, AND YOU ARE REQUESTED NOT TO SEND US A
PROXY. Enclosed
for your information is our Annual Report on Form 10-KSB for the year ended
December 31, 2004.
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Sincerely, |
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/s/ Mike Liddell |
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Mike Liddell |
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Chief Executive
Officer |
April 29,
2005
Oklahoma
City, Oklahoma
GULFPORT
ENERGY CORPORATION
14313
N. MAY AVENUE, SUITE 100
OKLAHOMA
CITY, OKLAHOMA 73134
____________________________
INFORMATION
STATEMENT
____________________________
Background
Section 228(a)
of the General Corporation Law of the State of Delaware states that, unless
otherwise provided in the certificate of incorporation, any action that may be
taken at any annual or special meeting of stockholders may be taken without a
meeting, without prior notice and without a vote, if consents in writing,
setting forth the action so taken, are signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted, and those consents are delivered to the
corporation by delivery to its registered office in Delaware, its principal
place of business, or an officer or agent of the corporation having custody of
the book in which proceedings of meetings of stockholders are recorded. The
Company’s restated certificate of incorporation contains no provision or
language in any way limiting the right of our stockholders to take action by
written consent. On April 15, 2005, holders of more than a majority of the
outstanding shares of our voting stock executed a written consent approving the
directors nominated by the Company’s Board of Directors to serve until the 2006
annual meeting of stockholders or until their successors are duly elected and
qualified or until each such director’s earlier resignation or removal. This
consent was executed following approval of the actions by the Company’s Board of
Directors on Mach 31, 2005. Because the actions have been approved by the
holders of the required majority of the outstanding shares that are entitled to
cast votes, no other stockholder approval of these actions is necessary. This
Information Statement will also serve as notice of actions taken without a
meeting as required by Section 228(e) of the Delaware General Corporation
Law. No further notice of the actions described herein will be given to
you.
This
Information Statement is provided to the Company’s stockholders for
informational purposes only, and you need not take any further action in
connection with this Information Statement. The Company will bear all costs of
preparing and delivering this Information Statement.
Outstanding
Shares and Voting Rights
Pursuant
to the Company’s restated certificate of incorporation, the Company currently
has authorized for issuance 35,000,000 shares of common stock, par value $0.01
per share, and 5,000,000 shares of preferred stock, par value $0.01 per share,
of which the Company has designated 30,000 shares as Series A Preferred Stock.
As of close of business on the Record Date, the Company had 31,883,188 shares of
Common Stock issued and outstanding and no shares of Series A preferred stock
issued and outstanding. Each share of Common Stock outstanding as of close of
business on the Record Date is entitled to one vote on the matter submitted to a
vote of the common stockholders. The holders of Series A preferred stock do not
have any voting rights with respect to the election of directors.
This
Information Statement is being mailed on or about April 29, 2005 to the
Company’s stockholders of record on the Record Date, which is March 31, 2005.
Section 213(b) of the Delaware General Corporation Law sets forth the rules
for ascertaining the record date to determine which stockholders of a
corporation are eligible to consent to action by written consent pursuant to
Section 228 of the Delaware General Corporation Law. Pursuant to
Section 213(b), the Company’s Board of Directors determined that
stockholders of record on the Record Date were entitled to consent to the
actions described in this Information Statement.
The
April 15, 2005 written consent of stockholders referenced above and
described in this Information Statement was executed by stockholders holding
over 61.6% of the shares eligible to vote on those matters on that date. No
additional action will be undertaken pursuant to such written consents, and no
dissenters’ rights under Delaware law are afforded to the Company’s stockholders
as a result of the action taken by written consent. ACCORDINGLY,
WE ARE NOT ASKING YOU FOR A PROXY, AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
ELECTION
OF DIRECTORS
On March
31, 2005, the Board of Directors nominated five persons to serve on the
Company’s Board of Directors of the Company until the 2006 annual meeting of
stockholders or until their successors are duly elected and qualified or until
each such director’s earlier resignation or removal. On April 15, 2005, in
accordance with Delaware law, the holders of a majority of the outstanding
shares of the Company’s Common Stock executed a written consent electing the
five nominated persons as Directors of the Company.
The
Company’s Board of Directors consists of five individuals. All five of the
persons elected are now members of the Board of Directors. The following
information about the directors was provided by the directors:
|
Name |
Age |
Position |
| Mike Liddell |
51 |
Chairman of the Board, Chief Executive
Officer and Director |
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| Robert E. Brooks |
58 |
Director |
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| David L. Houston |
52 |
Director |
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| Mickey Liddell |
43 |
Director |
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| Dan Noles |
57 |
Director |
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MIKE LIDDELL, has
served as a director of the Company since July 11, 1997, as Chief Executive
Officer since April 28, 1998 and as Chairman of the Board since
July 28, 1998 and President since July 15, 2000. In addition, Mr.
Liddell served as Chief Executive Officer of DLB Oil & Gas, Inc. from
October 1994 to April 28, 1998, and as a director of DLB from 1991
through April 1998. From 1991 to 1994, Mr. Liddell was President of DLB.
From 1979 to 1991, he was President and Chief Executive Officer of DLB Energy.
He received a B.S. degree in education from Oklahoma State University. He is the
brother of Mickey Liddell and brother-in-law of Dan Noles.
Committees:
None
ROBERT E.
BROOKS, has served as a director of Gulfport since July 11, 1997. Mr.
Brooks is currently president of Delphi Oil & Gas, Inc. From 1997 to 2002,
Mr. Brooks was a partner with Brooks Greenblatt, a commercial finance company
located in Baton Rouge, Louisiana that was formed by Mr. Brooks in
July 1997. Mr. Brooks is a Certified Public Accountant and was Senior Vice
President in charge of Asset Finance and Managed Assets for Bank One, Louisiana
between 1993 and July 1997. He received his B.S. degree from Purdue
University in mechanical engineering in 1969. He obtained graduate degrees in
finance and accounting from the Graduate School of Business at the University of
Chicago in 1974.
Committees:
Audit and Compensation
DAVID L.
HOUSTON, has served as a director of the Company since July 1998. Since
1991, Mr. Houston has been the principal of Houston & Associates, a firm
that offers life and disability insurance, compensation and benefits plans and
estate planning. Prior to 1991, he was President and Chief Executive Officer of
Equity Bank for Savings, F.A. He currently serves on the board of directors and
executive committee of Deaconess Hospital, Oklahoma City, Oklahoma, and is the
former chair of the Oklahoma State Ethics Commission and the Oklahoma League of
Savings Institutions. He received a Bachelor of Science degree in business from
Oklahoma State University and a graduate degree in banking from Louisiana State
University.
Committees:
Audit and Compensation
MICKEY
LIDDELL, has served as a director of the Company since January 1999. Since 2001,
Mr. Liddell has been the President of Berlanti-Liddell Entertainment, LLC, a
television and motion picture production company. From 2000 through 2001, Mr.
Liddell served as President of Entertainment Services, LLC. From 1994 through
1999, Mr. Liddell served as President of Banner Entertainment, LLC. Both Banner
Entertainment LLC and Mr. Liddell filed for bankruptcy in 1999. Mr. Liddell
received a Bachelor of Arts from the University of Oklahoma in Communications in
1984 and a graduate degree from Parson School of Design in New York, New York in
1987. He is the brother of Mike Liddell and brother-in-law of Dan
Noles.
Committees:
Audit and Compensation
DAN
NOLES, has served as a director of the Company since January 2000. Mr. Noles is
the President of Dan Noles Construction LLC. Prior to that he served as the
President of Atoka Management Company, an oilfield equipment company. Mr. Noles
received his Bachelor degree in Finance from the University of Oklahoma in 1970.
Mr. Noles is the brother-in-law of Mike Liddell and Mickey Liddell.
Committees:
Audit
CORPORATE
GOVERNANCE
Board
of Directors and Committees
We are
managed under the direction of our Board of Directors. The size of our board is
set at 5 members and we currently have 5 directors including 4 non-employee
directors. The Board of Directors held nine meetings in 2004. In addition to the
nine meetings, the Board adopted resolutions by unanimous written consent. The
Company’s Board of Directors has two standing committees: the audit committee
and the compensation committee. Each of the directors attended at least 75% of
the aggregate of the total number of meetings held by the Board of Directors
and, if applicable, all meetings of committees of the Board of Directors on
which such director served during 2004.
The audit
committee’s functions include the following: (a) assist the Board in its
oversight responsibilities regarding (1) the integrity of the Company’s
financial statements, (2) the Company’s compliance with legal and
regulatory requirements, (3) the independent accountant’s qualifications
and independence and (4) the accounting and financial reporting processes
of the Company and the audits of the financial statements of the Company;
(b) prepare the report required by the SEC for inclusion in the Company’s
annual proxy or information statement; (c) appoint, retain, compensate,
evaluate and terminate the Company’s independent accountants; (d) approve
audit and non-audit services to be performed by the independent accountants; and
(e) perform such other functions as the Board of Directors may from time to
time assign to the audit committee.
During
2004, the audit committee held two meetings. In 2004, the audit committee was
composed of Dan Noles, David Houston, Robert Brooks and Mickey Liddell, all of
who are non-employee directors. Mr. Houston serves as Chairman of the audit
committee and is designated as the “audit committee financial expert” as such
term is defined in Item 401(e) of Regulation S-B. Mr. Houston and Mr. Brooks are
“independent” within the meaning of the NASD’s and AMEX’s director independence
standards. Mickey Liddell and Dan Noles are not independent due to their famial
relationship to Mike Liddell. The Board of Directors has adopted an Audit
Committee Charter which is attached to this Information Statement as Annex A.
The
Compensation Committee considers executive employment agreements, adoption of
employee benefit plans and other issues related to compensation and employee
benefits. The Compensation Committee is comprised of Robert Brooks, David
Houston and Mickey Liddell, all of whom are “non-employee directors” as defined
by Rule 16b-3 promulgated under the Exchange Act and “outside directors” as
defined by Section 162(m) of the Internal Revenue Code. The Compensation
Committee did not hold any meetings during 2004.
The
Company’s Board of Directors does not have a standing nominating committee. The
entire Board of Directors of the Company participates in the consideration of
director nominees. The Board does not deem it necessary to establish a
nominating committee because the Company’s Board of Directors is relatively
small in size and believes it can operate more effectively in concert. Further,
because there has not been turnover in the Board, there has been no need to
nominate new directors.
Identifying
and Evaluating Nominees for Directors
The
Company’s Board of Directors utilizes a variety of methods for identifying and
evaluating nominees for director. In the event that vacancies are anticipated,
or otherwise arise, the Company’s Board of Directors considers various potential
candidates for director. Candidates may come to the attention of the Company’s
Board of Directors through current board members, professional search firms,
stockholders or other persons. These candidates are evaluated at regular or
special meetings of the Company’s Board of Directors, and may be considered at
any point during the year. In evaluating a board candidate, the Company’s Board
of Directors will consider the skills and experience of the candidate in the
context of the needs of the board, as well as the candidate’s qualification as
independent for board and committee service under the applicable standards. Each
of the Company’s directors must represent the interests of all
stockholders.
The
Company’s Board of Directors may review materials provided by professional
search firms or other parties in connection with a nominee. In evaluating such
nominations, the Company’s Board of Directors will seek to achieve a balance of
knowledge, experience and capability on the board. After completing its
evaluation, the Company’s Board of Directors makes a determination as to the
slate of nominees and makes its recommendation with respect to such nominees to
its controlling stockholder for approval.
Communications
with the Board
Individuals
may communicate with the Company’s Board of Directors or individual directors by
writing to the Company’s Secretary at Gulfport Energy Corporation, 14313 N. May
Avenue, Suite 100, Oklahoma City, Oklahoma 73134. The Secretary will review all
such correspondence and forward to the Board of Directors a summary of all such
correspondence and copies of all correspondence that, in the opinion of the
Secretary, relates to the functions of the Board or committees thereof or that
he otherwise determines requires their attention. Directors may review a log of
all such correspondence received by the Company and request copies. Concerns
relating to accounting, internal control over financial reporting or auditing
matters will be immediately brought to the attention of the Chairman of the
audit committee and handled in accordance with its procedures established with
respect to such matters.
Code
of Ethics
On
November 14, 2003, the Company adopted a code of ethics which applies to
its Chief Executive Officer and Chief Financial Officer. A copy of the Company’s
code of ethics has been filed as Exhibit 14.0 to its Annual Report filed on Form
10-KSB on March 30, 2005, for the fiscal year ended December 31,
2004.
AUDIT
COMMITTEE
REPORT
This
disclosure statement is being provided to inform stockholders of the audit
committee’s oversight with respect to the Company’s financial
reporting.
The audit
committee has reviewed and discussed the audited financial statements as of and
for the year ended December 31, 2004 (the “Audited Financial Statements”) and
footnotes thereto with management and the independent auditors. In addition, the
audit committee discussed with the independent auditors the matters required to
be disclosed by Statement of Auditing Standards No. 61. The audit committee
discussed with the Company’s auditors the independence of such auditors from
management of the Company, including a review of audits and non-audit fees, and
received written disclosures concerning the auditors’ independence required to
be made by the auditors of the Company by the Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees). The audit
committee has also discussed with management of the Company and the independent
auditors such other matters and received such assurance from them, as the audit
committee deemed appropriate.
Management
is responsible for the preparation and presentation of the Audited Financial
Statements and the Company’s internal controls over financial reporting. The
independent auditors are responsible for performing an independent audit of the
Company’s financial statements in accordance with GAAP and issuing a report
thereon. The audit committee’s responsibility is to monitor and oversee this
process.
Based on
the foregoing review and discussions with management and the independent
auditors, and relying thereon, we have recommended to the Company and Board of
Directors the inclusion of the Audited Financial Statements in the Company’s
Annual Report on Form 10-KSB for the year ended December 31, 2004 for
filing with the SEC.
AUDIT
COMMITTEE
David
Houston
Dan
Noles
Mickey
Liddell
Robert
Brooks
DIRECTOR
COMPENSATION
Members
of the Company’s Board of Directors who are also officers or employees of the
Company do not receive compensation for their services as directors. The Company
pays its non-employee directors a monthly retainer of $1,000 and a per meeting
attendance fee of $500 and reimburses all ordinary and necessary expenses
incurred in the conduct of the Company’s business.
EXECUTIVE
OFFICERS
The
officers of the Company are as follows:
|
Name |
Age |
Position |
| Mike Liddell |
51 |
Chairman of the Board, Chief Executive
Officer and Director |
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|
|
| Michael G. Moore |
48 |
Vice President and Chief Financial
Officer |
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| Joel H. McNatt |
47 |
Vice President, General Counsel and
Secretary |
MICHAEL
G. MOORE has served as Vice President and Chief Financial Officer of the Company
since July 2000. From May 1998 through July 2000, Mr. Moore served as
Vice President and Chief Financial Officer of Indian Oil Company. From September
1995 through May 1998, Mr. Moore served as Controller of DLB Oil & Gas, Inc.
Prior to that, Mr. Moore served as Controller of LEDCO, Inc., a Houston based
gas marketing company. Mr. Moore received both his B.B.A degree in finance and
his M.B.A. from the University of Central Oklahoma.
JOEL H.
MCNATT has served as Vice President and General Counsel of the Company since
November 2004. From May 1996 through October 2004, Mr. McNatt practiced in the
areas of energy, products liability, and complex business litigation with the
firm McKinney & Stringer, P.C. Mr. McNatt received his juris doctorate,
summa
cum laude, from
Oklahoma City University School of Law in 1996, and prior to that his B.A. in
journalism from the University of Oklahoma.
EXECUTIVE
COMPENSATION
The
following table sets forth the compensation information earned during 2004, 2003
and 2002 by the Chief Executive Officer and by the two other most highly
compensated executive officers of the Company whose annual salary and bonus
exceeded $100,000 (the “named executives”), in all capacities in which they
served during that period.
|
Name
and Principal Position |
|
Year |
|
Annual
Compensation (1) |
|
Long
Term Compensation Awards |
|
|
|
|
|
|
|
|
Salary |
|
|
Bonus |
|
|
|
|
Mike
Liddell |
|
|
2004 |
|
$ |
224,184 |
|
$ |
29,108 |
|
$ |
22,423 |
|
Chief
Executive |
|
|
2003 |
|
|
218,566 |
|
|
24,000 |
|
|
19,500 |
|
Officer |
|
|
2002 |
|
|
200,000 |
|
|
24,000 |
|
|
19,142 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
Moore |
|
|
2004 |
|
$ |
128,813 |
|
$ |
17,138 |
|
$ |
8,757 |
|
Vice
President & |
|
|
2003 |
|
|
105,000 |
|
|
13,800 |
|
|
7,128 |
|
Chief
Financial Officer |
|
|
2002 |
|
|
105,000 |
|
|
23,800 |
|
|
8,094 |
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
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(1) |
Amounts
shown include cash and non-cash compensation earned and received by the
named executives as well as amounts earned but deferred at their election.
The Company provides various perquisites to certain employees, including
the named executives. In each case, the aggregate value of the perquisite
provided to the named executives did not exceed 10% of such named
executive’s total annual salary and bonus. |
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(2) |
Amounts
for Mike Liddell include the Company’s matching 401(k) plan contributions
of $15,198, $12,000 and $13,717 during 2004, 2003 and 2002 respectively
and life insurance premium payments of $7,225, $7,500, and $5,425 during
2004, 2003 and 2002 respectively. Amounts for Michael Moore and Joel H.
McNatt represent the Company’s matching 401(k) plan contributions during
each of the indicated years. |
Stock
Options
No
options were granted to the named executive officers during 2004. The following
table sets forth the number of unexercised options held by named executives as
of December 31, 2004. No options were exercised by named executives in
2004, 2003 or 2002.
| |
Number
of Securities
Underlying
Unexercised
Options
at Fiscal Year End |
Value
of Unexercised In
the
Money Options Year End |
|
Name |
Exercisable(1) |
Un-exercisable |
Exercisable(2) |
Unexercisable
|
| |
|
|
|
|
|
Mike
Liddell
|
457,270 |
- |
$576,160 |
- |
|
Mike
Moore |
10,000 |
- |
$12,600 |
- |
_____________
|
(1) |
These
options are exercisable at $2.00 per share.
|
|
(2) |
Value
for “in the money” options represents the positive spread between the
exercise price of $2.00 per share and the closing price of the shares of
Common Stock of $3.26 per share as reported by the NASD OTC Bulletin Board
on December 30, 2004. |
Employment
Agreements
In
June 2003, the Company renewed a five year employment agreement with its
Chief Executive Officer, Mike Liddell. The employment agreement provides an
annual base salary of $200,000 adjusted for cost of living increases. The
employment agreement contains a change of control provision which guarantees Mr.
Liddell one-year salary upon the occurrence of a change of control in the
Company.
Securities
Authorized for Issuance under Equity Compensation Plans
The
following table sets forth certain information, as of December 31, 2004, with
respect to all compensation plans previously approved by the Company’s security
holders which consists of the Company’s 1999 Stock Option Plan. Amount below do
not include shares issuable under the Company’s 2005 Stock Incentive Plan. The
Company does not have any equity compensation plans which have not been approved
by the Company’s security holders.
| |
Number
of Securities To be Issued Upon Exercise of Outstanding Options, Warrants
and Rights |
|
Weighted
Average Exercise Price of Outstanding Options, Warrants and
Rights |
|
Number
of Securities Remaining Available For Future Issuance Under Equity
Compensation Plans (Excluding Securities Reflected in Far Left
Column) |
|
Equity
compensation plans approved by security holders
|
627,337 (1)
|
|
$2.00
|
|
0
(1)
|
|
Equity
compensation plans not approved by security holders
|
--
|
|
--
|
|
--
|
|
Total
|
627,337
|
|
$2.00
|
|
0
|
__________________
|
(1) |
No
additional securities will be issued under the Company’s 1999 Stock Option
Plan other than upon the exercise of options that are
outstanding. |
COMPLIANCE
WITH SECTION 16(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a)
of the Securities Exchange Act of 1934 requires executive officers and
directors, and persons beneficially owning more that 10% of the Company’s stock
to file initial reports of ownership and reports of changes in ownership with
the Securities and Exchange Commission and with the Company. Based solely on a
review of the reports sent to the Company and written representations from the
executive officers and directors, the Company believes that each of its
directors and executive officers met his Section 16(a) filing obligations
during 2004.
CERTAIN
TRANSACTIONS
Management
Services
The
Company’s personnel help manage oil and gas and oil and gas related assets owned
by affiliates of its largest stockholder. The Company is reimbursed an amount
equal to the pro rata share of time its employees spend performing such services
and overhead. In 2003 and 2004, the Company received payments for such services
and overhead totaling approximately $764,000 and $2,145,608,
respectively.
Amendment
of Terms of the Series A Preferred Stock
In April
2004, the Board of Directors of the Company approved and the Company received
the consent of holders of the requisite number of shares of capital stock to
amend the Company's Certificate of Designations with respect to the Series A
preferred stock to give the Company the ability to pay dividends on the Series A
preferred stock with additional shares of Series A preferred stock after March
31, 2004, for so long as such shares remain outstanding and prior to the
mandatory redemption date. The Company has issued additional shares totaling
$1,713,000 and $1,949,000 for the years ended December 31, 2003 and 2004
respectively, related to the shares of Series A preferred stock issued and
outstanding during that time period. Holders of Series A preferred stock
included Charles Davidson and Wexford and its affiliates, and Mike Liddell.
Backstop
Agreement for Rights Offering
On July
22, 2004, the Company launched its rights offering of common stock subscription
rights to purchase up to an aggregate of ten million shares of its common stock
at a subscription price of $1.20 per share. Rights to purchase all ten million
shares of common stock were exercised in the rights offering, which expired on
August 20, 2004. The Company received net cash proceeds of approximately $11.1
million from the rights offering after deducting offering expenses of
approximately $120,000. CD Holding had agreed, subject to certain conditions, to
back-stop the rights offering for a commitment fee of 2% of the gross proceeds
from the rights offering, which was also applied to the subscription price
payable upon exercise of the rights issued to it in the rights
offering.
Rights
Offering Bridge Financing
In
connection with this rights offering, on April 30, 2004, the Company had entered
into a $3,000,000 revolving credit facility with CD Holding, L.L.C., a principal
stockholder of the Company. Borrowings under the credit facility were due on the
earlier of the closing of the rights offering and August 1, 2005 and bore
interest at 10.0% per annum. Under the credit facility, CD Holding had the
option to apply the outstanding principal amount and any accrued but unpaid
interest either (1) to the subscription price payable upon exercise of the
rights issued to CD Holding in the rights offering, or (2) to the purchase price
for our common stock. CD Holding elected to apply the outstanding principal
balance amount and accrued but unpaid interest under its credit facility to the
subscription price payable by CD Holding upon exercise of the rights issued to
it in the rights offering.
Exercise
of Warrants and Preferred Stock Redemption
On
February 23, 2005, the holders of warrants to purchase 7,336,687 shares of the
Company’s common stock exercised their warrants for an
exercise price of $1.19 per share resulting in gross proceeds to the Company of
$8.7 million. No underwriting discounts or commissions were paid in conjunction
with the issuances. On February 23, 2005, the Company used the proceeds from the
exercise of the warrants, along with a portion of the proceeds from the sale of
common stock, to redeem 12,502 shares of the 14,271 shares of the Company’s
outstanding Series A preferred stock for an aggregate of $12.5 million,
including accrued but unpaid dividends. After the sale of the common stock, the
exercise of the warrants and the redemption of the preferred stock, Gulfport
received net proceeds of $10.2 million. On March 18, 2005, the Company used the
proceeds from the exercise of the warrants, along with a portion of the proceeds
from the sale of common stock, to redeem 148.8 shares of the 1,769 shares of the
Company’s then outstanding Series A preferred stock
for an aggregate of $149,00, including accrued but unpaid
dividends. On March 31, 2005, the Company used the proceeds from the exercise of
the warrants, along with a portion of the proceeds from the sale of common
stock, to redeem 1,481.3 shares of the 1,620.2 shares of the Company’s then
remaining outstanding Series A preferred stock for an aggregate of $1,481,000,
including accrued but unpaid dividends. Holders of these warrants and Series A
preferred stock included Charles Davidson and Wexford and its affiliates, and
Mike Liddell.
OTHER
INFORMATION ABOUT DIRECTORS, OFFICERS, AND CERTAIN
STOCKHOLDERS
Beneficial
Ownership of Directors, Officers and Certain Stockholders
The
following table sets forth certain information regarding the beneficial
ownership of the Company’s Common Stock as of the Record Date by (1) each
director, (2) each named executive officer, (3) each person known or believed by
the Company to own beneficially five percent or more of the Common Stock and (4)
all directors and executive officers as a group.
| |
|
Beneficial
Ownership (2) |
|
|
Name
and Address of Beneficial Owner (1)
|
|
|
Shares |
|
|
Percentage |
|
| |
|
|
|
|
|
|
|
Charles
E. Davidson (3)
411
West Putnam Avenue
Greenwich,
CT 06830 |
|
|
19,576,603 |
|
|
50.0 |
% |
| |
|
|
|
|
|
|
|
South
Point Capital Advisors, LP (4)
237
Park Avenue, Suite 900
New
York, NY 10017 |
|
|
2,018,527 |
|
|
6.3 |
% |
| |
|
|
|
|
|
|
|
Harbert
Distressed Investment Master Fund, Ltd. (5)
c/o
International Fund Services (Ireland) Limited
3rd
Floor, Bishop Square
Redmond’s
Hill
Dublin
2, Ireland |
|
|
3,921,830 |
|
|
12.3 |
% |
| |
|
|
|
|
|
|
|
Mike
Liddell (6) |
|
|
2,494,350 |
|
|
7.7 |
% |
| |
|
|
|
|
|
|
|
Robert
Brooks (7) |
|
|
20,000 |
|
|
* |
|
| |
|
|
|
|
|
|
|
David
Houston (8) |
|
|
20,000 |
|
|
* |
|
| |
|
|
|
|
|
|
|
Mickey
Liddell (9) |
|
|
20,000 |
|
|
* |
|
| |
|
|
|
|
|
|
|
Dan
Noles (10) |
|
|
20,000 |
|
|
* |
|
| |
|
|
|
|
|
|
|
Michael
G. Moore (11) |
|
|
10,000 |
|
|
* |
|
| |
|
|
|
|
|
|
|
Joel
H. McNatt |
|
|
-- |
|
|
* |
|
| |
|
|
|
|
|
|
|
All
directors and executive officers as a group
(7
individuals) |
|
|
2,584,350 |
|
|
8.0 |
% |
_________________________
* Less than
one percent
(1)
Unless
otherwise indicated, each person or group has sole voting and sole dispositive
power with respect to all listed shares. The address of the Company’s directors
and executive officers is 14313 N. May Avenue, Suite 100, Oklahoma City,
Oklahoma 73134.
(2)
Beneficial
ownership is determined in accordance with the SEC’s rules. In computing
percentage ownership of each person, shares of Common Stock subject to options
held by that person that are currently exercisable, or exercisable within 60
days from the date of this Information Statement, are deemed to be beneficially
owned. These shares, however, are not deemed outstanding for the purpose of
computing the percentage ownership of each other person. The percentage of
shares beneficially owned is based on 31,883,188 shares of Common Stock
outstanding as of the date of this Information Statement. Unless otherwise
indicated, all amount exclude shares issuable upon the exercise of outstanding
options that are not exercisable as of the date of this Information Statement or
exercisable within 60 days from the date of this Information
Statement.
(3)
Includes
8,046,023 shares of Common Stock held by CD Holding, L.L.C. and 810,957 shares
of Common Stock held in an IRA for Mr. Davidson. Mr. Davidson is the sole member
of CD Holding, L.L.C. Mr. Davidson is the Chairman and controlling member of
Wexford Management, L.L.C. In addition, the amount includes 3,479,292 shares of
Common Stock owned by the following investment funds (the “Wexford Entities”)
that are affiliated with Wexford Management: Wexford Special Situations 1996,
L.P.; Wexford Special Situations 1996 Institutional, L.P.; Wexford Special
Situations 1996, Limited; Wexford-Euris Special Situations 1996, L.P.; Wexford
Spectrum Investors, L.L.C.; Wexford Capital Partners II, L.P.; Wexford Overseas
Partners I, L.P. Includes 7,240,331 shares of Common Stock issuable upon the
exercise of warrants that, as of the date of this Information Statement, were
exercisable owned by the following investment funds that are affiliated with
Wexford Management: Wexford Special Situations 1996, Limited; Wexford-Euris
Special Situations 1996, L.P.; Wexford Spectrum Investors, L.L.C.; Wexford
Capital Partners II, L.P.; Wexford Overseas Partners I, L.P. Mr. Davidson
disclaims beneficial ownership of the 3,479,292 shares of Common Stock and
warrants to purchase 7,240,331 shares of Common Stock owned by the Wexford
Entities.
(4)
Based
solely upon information obtained from Amendment No. 1 to Schedule 13G filed with
the SEC on March 10, 2005 on behalf of Southpoint Capital Advisors LLC, a
Delaware limited liability company (“Southpoint CA LLC”), Southpoint GP, LLC, a
Delaware limited liability company (“Southpoint GP LLC”), Southpoint Capital
Advisors LP, a Delaware limited partnership (“Southpoint Advisors”), Southpoint
GP, LP (“Southpoint GP”), Robert W. Butts and John S. Clark II, Southpoint
Advisors, Southpoint GP, Southpoint CA LLC, Southpoint GP LLC, Robert W. Butts
and John S. Clark II have sole voting and dispositive power over 2,018,527
shares of Common Stock. Southpoint CA LLC is the general partner of Southpoint
Advisors. Southpoint GP LLC is the general partner of Southpoint GP. Southpoint
GP is the general partner of Southpoint Fund LP, a Delaware limited partnership
(the “Fund”), Southpoint Qualified Fund LP, a Delaware limited partnership (the
“Qualified Fund”), and Southpoint Offshore Operating Fund, LP, a Cayman Islands
exempted limited partnership (the “Offshore Operating Fund”). Southpoint
Offshore Fund, Ltd., a Cayman Island exempted company (the “Offshore Fund”), is
also a general partner of the Offshore Operating Fund.
(5)
Based
solely upon information obtained from Harbert Distressed Investment Master Fund,
Ltd. (“Master Fund”) and Alpha US Sub Fund VI, LLC (“Alpha”) and Amendment No. 2
to Schedule 13G filed by the Master Fund, HMC Distressed Investment Offshore
Manager, L.L.C. (“Offshore Manager”) and HMC Investors, L.L.C. (“HMC Investors”)
with the SEC on March 3, 2005, the Offshore Manager and the Master Fund share
voting and dispositive power over 3,921,830 shares of Common Stock (the “HMC
Shares”) which are shown in the table as beneficially owned by the Master Fund.
In addition to the HMC Shares, HMC Investors, Raymond J. Harbert, Michael D.
Luce, and Philip A. Falcone may also be deemed to have shared voting and
dispositive power over an additional 90,270 shares of Common Stock owned by
Alpha (the “Alpha Shares”) which are excluded from the amount shown as
beneficially owned by the Master Fund. We have been informed by the Master Fund
and Alpha that each disclaims beneficial ownership of the HMC Shares and the
Alpha Shares except to the extent of their actual pecuniary interest. Each of
Master Fund and Alpha is or may be deemed to be an affiliate of a registered
broker-dealer. Master Fund is an entity organized in the Cayman Islands.
Offshore Manager is the sole investment manager of the Master Fund. HMC
Investors is the managing member of the Offshore Manager. Philip A. Falcone is a
member of Offshore Manager and acts as portfolio manager for the Master Fund.
Alpha is a separate managed account also managed by Philip A. Falcone. Raymond
J. Harbert and Michael D. Luce are members of HMC Investors.
(6)
Includes
1,447,070 shares of Common Stock held of record by Liddell Investments, L.L.C.
Mr. Liddell is the sole member of Liddell Investments, L.L.C. Includes 590,010
shares of Common Stock held of record by certain family members of Mr. Liddell.
Also includes 457,270 shares of Common Stock issuable upon the exercise of
options that, as of the date of this Information Statement, were exercisable or
exercisable within 60 days of the date of this Information
Statement.
(7)
Represents
20,000 shares of Common Stock issuable upon the exercise of stock options that,
as of the date of this Information Statement, were exercisable or exercisable
within 60 days from the date of this Information Statement.
(8)
Represents
20,000 shares of Common Stock issuable upon the exercise of stock options that,
as of the date of this Information Statement, were exercisable or exercisable
within 60 days from the date of this Information Statement.
(9)
Represents
20,000 shares of Common Stock issuable upon the exercise of stock options that,
as of the date of this Information Statement, were exercisable or exercisable
within 60 days from the date of this Information Statement.
(10) Represents
20,000 shares of Common Stock issuable upon the exercise of stock options that,
as of the date of this Information Statement, were exercisable or exercisable
within 60 days from the date of this Information Statement.
(11)
Represents
10,000 shares of Common Stock issuable upon the exercise of stock options that,
as of date of this Information Statement, were exercisable or exercisable within
60 days from the date of this Information Statement.
Liability
of Directors and Officers and Indemnification
As
permitted by the Delaware General Corporate Law (the “DGCL”), the Company’s
Certificate of Incorporation eliminates in certain circumstances the monetary
liability of the directors for a breach of their fiduciary duty. These
provisions do not eliminate liability of the directors for (i) a breach of
the director’s duty of loyalty to the Company or its Stockholders,
(ii) acts or omissions by a director not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) liability
arising under Section 174 of the DGCL (relating to the declaration of
dividends and purchase or redemption of shares in violation of the DGCL) or
(iv) any transaction from which the director derived an improper personal
benefit. In addition, these provisions do not eliminate the liability of a
director for violations of the Federal securities laws, nor do they limit the
rights of the Company or its Stockholders, in appropriate circumstances, to seek
equitable remedies such as injunctive or other forms of non-monetary relief.
Such remedies may not be effective in all cases.
The
Bylaws provide that the Company shall indemnify its directors and officers to
the fullest extent permitted by the DGCL. Under such provisions, any director or
officer, who in his capacity as such, is made or threatened to be made a party
to any suit or proceeding, may be indemnified if the Board of Directors
determines such director or officer acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interest of the Company.
The Bylaws and the DGCL, further provide that such indemnification is not
exclusive of any other rights to which such individuals may be entitled under
the Certificate of Incorporation, the Bylaws, any agreement, vote of
Stockholders or disinterested directors or otherwise.
INDEPENDENT
ACCOUNTANTS
On
February 9, 2005 the Company dismissed Hogan & Slovacek as its independent
registered public accounting firm. The Company’s Audit Committee participated in
and approved the decision to change the Company’s independent registered public
accounting firm.
Hogan
& Slovacek’s audit reports for the past two fiscal years ended December 31,
2002 and December 31, 2003, contain no adverse opinion or disclaimer of opinion
and were not qualified or modified as to uncertainty, audit scope or accounting
principle.
During
the two most recent fiscal years and through February 9, 2005, there have been
no disagreements between the Company and Hogan & Slovacek 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
Hogan & Slovacek would have caused them to make reference thereto in their
reports on the financial statements for such years.
During
the fiscal years ended December 31, 2003 and December 31, 2004 and through
February 9, 2005, there have been no reportable events as described in Item
304(a)(1)(iv)(B) of Regulation S-B.
The
Company engaged Grant Thornton LLP as its new independent registered public
accounting firm (the “independent auditor”) as of February 9, 2005. As part of
its engagement, Grant Thornton will audit the balance sheet of the Company as of
December 31, 2004 and the related statements of operations, stockholders’ equity
and cash flows for the year then ended and will perform a review of the
Company’s interim financials for each quarter in the fiscal year ending December
31, 2005. The audit committee has not asked the stockholders to ratify its
selection of auditors, because stockholder ratification is not required under
applicable rules and regulations.
During
the two most recent fiscal years and in the subsequent interim period, the
Company did not consult with Grant Thornton LLP regarding (1) the application of
accounting principles to a specified transaction, either completed or proposed,
or the type of audit opinion that might be rendered on the Company’s financial
statements, and neither a written report was provided to the Company nor oral
advice was provided that was an important factor considered by the Company in
reaching a decision as to the accounting, auditing or financial reporting issue;
or (2) any matter that was either the subject of a disagreement, as that term is
used in Item 304(a)(1)(iv) of Regulation S-B and the related instructions to
Item 304 of Regulation S-B.
The firm
of Grant Thornton LLP served as the Company’s independent auditors for 2004.
This firm has advised the Company that it has no direct or indirect financial
interest in the Company.
Auditors’
Fees
The audit
committee’s policy is to pre-approve all audit and permissible non-audit
services provided by the independent auditors. These services may include audit
services, audit-related services, tax services and other services. Pre-approval
is generally provided for up to one year and any pre-approval is detailed as to
the particular service or category of services and is generally subject to a
specific budget. All fees paid to the independent auditors in 2004 were
pre-approved by the audit committee.
Audit
Fees. For
professional services rendered by the Company’s independent auditors for the
audit of the Company’s annual financial statements for 2004 and reviews of the
financial statements included in our Quarterly Reports on Form 10-QSB during
2004, Grant Thornton, LP billed the Company fees in the aggregate amount of
$77,625
for the
2004 and Hogan & Slovacek, PC billed the Company fees in the aggregate
amount of $18,000 and
$50,000 for 2004 and 2003 respectively.
Audit-Related
Fees. Grant
Thornton, LP did not perform any audit-related services other than those
described above for the Company during 2004.
Hogan
& Slovacek, PC did not perform any audit-related services other than those
described above for the Company during 2003.
Tax
Fees. Grant
Thornton, LP did not perform any tax or tax-related services for the Company
during 2004. Hogan & Slovacek, PC did not perform any tax or tax-related
services for the Company during 2003.
All
Other Fees. No
other fees were billed to the Company in 2004 and 2003 by Hogan & Slovacek,
PC or Grant Thornton, LP for services performed for 2004 and 2003, other than
the fees described above.
INCORPORATION
BY REFERENCE
With
respect to any filings with the SEC into which this Information Statement is
incorporated by reference, the material under the headings “Compensation
Committee Report” and “Audit Committee Report” shall not be incorporated into
such filings.
ADDITIONAL
INFORMATION
The
Company’s Annual Report to stockholders for the fiscal year ended
December 31, 2004, including financial statements, is being mailed herewith
to all stockholders entitled to notice of the actions described in this
Information Statement. The annual report does not constitute a part of this
Information Statement.
The
Company’s Annual Report on Form 10-KSB, including the financial statements and
schedule thereto, for the year ended December 31, 2004, as filed with the
SEC, will be furnished without charge to any stockholder upon written request
addressed to Mr. Joel H. McNatt, General Counsel, Gulfport Energy Corporation,
14313 N. May Avenue, Suite 100, Oklahoma City, Oklahoma 73134. Stockholders
requesting exhibits to the Form 10-KSB will be provided the same upon payment of
reproduction expenses.
| By the Order of the
Board of Directors |
|
|
|
| /s/ Joel H.
McNatt |
|
|
|
|
|
|
|
Joel H.
McNatt
Secretary |
|
|
|
April 29,
2005
Oklahoma
City, Oklahoma
ANNEX
A
Audit
Committee Charter
GULFPORT
ENERGY CORPORATION, INC.
CHARTER
OF THE AUDIT COMMITTEE
OF
THE BOARD OF DIRECTORS
This
Charter identifies the purpose, composition, meeting requirements, committee
responsibilities, annual evaluation procedures and investigations and studies of
the Audit Committee (the “Committee”) of the Board of Directors (the “Board”) of
Gulfport Energy Corporation, Inc., a Delaware corporation (the
“Company”).
The
Committee has been established to: (a) assist the Board in its oversight
responsibilities regarding (1) the integrity of the Company’s financial
statements, (2) the Company’s compliance with legal and regulatory
requirements, (3) the independent accountant’s qualifications and
independence and (4) the accounting and financial reporting processes of
the Company and the audits of the financial statements of the Company;
(b) prepare the report required by the United States Securities and
Exchange Commission (the “SEC”) for inclusion in the Company’s annual proxy or
information statement; (c) appoint, retain, compensate, evaluate and
terminate the Company’s independent accountants; (d) approve audit and
non-audit services to be performed by the independent accountants; and
(e) perform such other functions as the Board may from time to time assign
to the Committee. In performing its duties, the Committee shall seek to maintain
an effective working relationship with the Board, the independent accountants
and management of the Company.
The
Committee shall be composed of at least three, but not more than five, members
(including a Chairperson), all of whom shall be “independent directors,” as such
term is defined in the rules and regulations of the SEC and the National
Association of Securities Dealers (“NASD”). The members of the Committee and the
Chairperson shall be selected annually by the Board and serve at the pleasure of
the Board. A Committee member (including the Chairperson) may be removed at any
time, with or without cause, by the Board. The Board may designate one or more
independent directors as alternate members of the Committee, who may replace any
absent or disqualified member or members at any meetings of the Committee. No
person may be made a member of the Committee if his or her service on the
Committee would violate any restriction on service imposed by any rule or
regulation of the SEC or any securities exchange or market on which shares of
the common stock of the Company are traded.
All
members of the Committee shall have a working familiarity with basic finance and
accounting practices and at least one member of the Committee shall be an “audit
committee financial expert” as defined in the applicable rules and regulations
of the SEC. Committee members may enhance their familiarity with finance and
accounting by participating in educational programs conducted by the Company or
an outside consultant. The Chairperson shall maintain regular communication with
the chief executive officer, chief financial officer and the lead partner of the
independent accountant.
Except
for Board and Committee fees, a member of the Committee shall not be permitted
to accept any fees paid directly or indirectly for services as a consultant,
legal advisor or financial advisor or any other fees prohibited by the rules of
the SEC and the NASD. In addition, no member of the Committee may be an
affiliated person of the Company or any of its subsidiaries. Members of the
Committee may receive their Board and Committee fees in cash, Company stock or
options or other in-kind consideration as determined by the Board or the
Compensation Committee, as applicable, in addition to all other benefits that
other directors of the Company receive.
| III. |
MEETING
REQUIREMENTS |
The
Committee shall meet as necessary, but at least four times each year, to enable
it to fulfill its responsibilities. The Committee shall meet at the call of its
Chairperson, preferably in conjunction with regular Board meetings. The
Committee may meet by telephone conference call or by any other means permitted
by law or the Company’s Bylaws. A majority of
the members of the Committee shall constitute a quorum. The
Committee shall act on the affirmative vote of a majority of members present at
a meeting at which a quorum is present. Without a meeting, the Committee may act
by unanimous written consent of all members. The Committee shall determine its
own rules and procedures, including designation of a chairperson pro tempore, in
the absence of the Chairperson, and designation of a secretary. The secretary
need not be a member of the Committee and shall attend Committee meetings and
prepare minutes. The Committee shall keep written minutes of its meetings, which
shall be recorded or filed with the books and records of the Company. Any member
of the Board shall be provided with copies of such Committee minutes if
requested. The Committee may ask members of management, employees, outside
counsel, the independent accountants or others whose advice and counsel are
relevant to the issues then being considered by the Committee, to attend any
meetings and to provide such pertinent information as the Committee may request.
The Chairperson of the Committee shall be responsible for leadership of the
Committee, including preparing the agenda, presiding over Committee meetings,
making Committee assignments and reporting the Committee’s actions to the Board
from time to time (but at least once each year) as requested by the
Board.
As part
of its responsibility to foster free and open communication, the Committee
should meet periodically with management and the independent accountants to
discuss any matters that the Committee or any of these groups believe should be
discussed privately. In addition, the Committee or at least its Chairperson
should meet with the independent accountants and management quarterly to review
the Company’s financial statements prior to their public release consistent with
the provisions set forth below in Section IV.
| IV. |
COMMITTEE
RESPONSIBILITIES |
In
carrying out its responsibilities, the Committee’s policies and procedures
should remain flexible to enable the Committee to react to changes in
circumstances and conditions so that it can fulfill its oversight
responsibilities. In addition to such other duties as the Board may from time to
time assign, the Committee shall have the following
responsibilities:
| A. |
Oversight
of the Financial Reporting Processes |
| 1. |
In
consultation with the independent accountants, review the integrity of the
Company’s financial reporting processes, both internal and external.
|
| 2. |
Consider
the independent accountant’s judgments about the quality and
appropriateness of the Company’s accounting principles as applied in its
financial reporting. Consider alternative accounting principles and
estimates. |
| 3. |
Annually
review with management, and separately with independent accountant, major
issues regarding the Company’s auditing and accounting principles and
practices and its presentation of financial statements, including the
adequacy of internal controls and special audit steps adopted in light of
material internal control deficiencies and any audit problems or
difficulties. |
| 4. |
Discuss
with management and legal counsel the status of pending litigation,
taxation matters, compliance policies and other areas of oversight
applicable to the legal and compliance area as may be appropriate.
|
| 5. |
Review
all analyst reports and press articles about the Company’s accounting and
disclosure practices and principles. |
| 6. |
Review
all analyses prepared by management and the independent accountants of
significant financial reporting issues and judgments made in connection
with the preparation of the Company’s financial statements, including any
analysis of the effect of alternative generally accepted accounting
principle (“GAAP”) methods on the Company’s financial statements and a
description of any transactions as to which management obtained Statement
on Auditing Standards No. 50 letters. |
| 7. |
Review
with management and the independent accountants the effect of regulatory
and accounting initiatives, as well as off-balance sheet structures, on
the Company’s financial statements. |
| 8. |
Prepare
regular reports to the Board on all matters within the scope of the
Committee’s functions. |
| B. |
Review
of Documents and Reports |
| 1. |
Review
and discuss with management and the independent accountants the Company’s
annual audited financial statements and quarterly financial statements
(including disclosures under the section entitled “Management’s Discussion
and Analysis of Financial Condition and Results of Operation”) and any
reports or other financial information submitted to any governmental body,
or the public, including any certification, report, opinion or review
rendered by the independent accountants, considering, as appropriate,
whether the information contained in these documents is consistent with
the information contained in the financial statements and whether the
independent accountants and legal counsel are satisfied with the
disclosure and content of such documents. These discussions shall include
consideration of the quality of the Company’s accounting principles as
applied in its financial reporting, including review of audit adjustments
(whether or not recorded) and any such other inquires as may be
appropriate. Based on the review, the Committee shall make its
recommendation to the Board as to the inclusion of the Company’s audited
consolidated financial statements in the Company’s annual report on Form
10-KSB. |
| 2. |
Review
and discuss with management and the independent accountants earnings press
releases, as well as financial information and earnings guidance provided
to analysts and rating agencies. The Committee need not discuss in advance
each earnings release but should generally discuss the types of
information to be disclosed and the type of presentation to be made in any
earnings release or guidance. |
| 3. |
Review
reports from management and the independent accountants on the Company’s
subsidiaries and affiliates, compliance with the Company’s code(s) of
conduct, applicable law and insider and related party transactions.
|
| 4. |
Review
with management and the independent accountants any correspondence with
regulators or government agencies and any employee complaints or published
reports that raise material issues regarding the Company’s financial
statements or accounting policies. |
| 5. |
Prepare
the report required by the rules of the SEC to be included in the
Company’s annual proxy or information statement.
|
| 6. |
Submit
the minutes of all meetings of the Committee to, or discuss the matters
discussed at each Committee meeting with, the Board.
|
| 7. |
Review
any restatements of financial statements that have occurred or were
recommended. Review the restatements made by other clients of the
independent accountants. |
| C. |
Independent
Accountant Matters |
| 1. |
Interview
and retain the Company’s independent accountants, considering the
accounting firm’s independence and effectiveness and approve the
engagement fees and other compensation to be paid to the independent
accountants. |
| 2. |
Meet
with the independent accountants and the Company’s financial management to
review the scope of the proposed external audit for the current
year. |
| 3. |
On
an annual basis, the Committee shall evaluate the independent accountant’s
qualifications, performance and independence. To assist in this
undertaking, the Committee shall require the independent accountants to
submit a report (which report shall be reviewed by the Committee)
describing (a) the independent accountant’s internal quality-control
procedures, (b) any material issues raised by the most recent
internal quality-control review, or peer review, of the accounting firm or
by any inquiry or investigations by governmental or professional
authorities (within the preceding five years) respecting one or more
independent audits carried out by the independent accountants, and any
steps taken to deal with any such issues and (c) all relationships
the independent accountants have with the Company and relevant third
parties to determine the impact, if any of such relationships on the
independence of the independent accountants. In making its determination,
the Committee shall consider not only auditing and other traditional
accounting functions performed by the independent accountants, but also
consulting, legal, information technology services and other professional
services rendered by the independent accountants and its affiliates. The
Committee shall also consider whether the provision of any of these
non-audit services is compatible with the independence standards under the
guidelines of the SEC and other applicable authorities (including,
possibly, the Independence Standards Board and the Public Company
Accounting Oversight Board) and shall approve in advance any audit
services and permissible non-audit services to be provided by the
independent accountants. |
| 4. |
Review
on an annual basis the experience and qualifications of the senior members
of the external audit team. Discuss the knowledge and experience of the
independent accountants and the senior members of the external audit team
with respect to the Company’s industry. The Committee shall ensure the
regular rotation of the lead audit partner and audit review partner as
required by law and consider whether there should be a periodic rotation
of the Company’s independent accountants. |
| 5. |
Review
the performance of the independent accountants and terminate the
independent accountants when circumstances warrant.
|
| 6. |
Establish
and periodically review hiring policies for employees or former employees
of the independent accountants. |
| 7. |
Review
with the independent accountants any problems or difficulties the auditors
may have encountered and any “management” or “internal control” letter
provided by the independent accountants and the Company’s response to that
letter. Such review should include: |
| (a) |
any
difficulties encountered in the course of the audit work, including any
restrictions on the scope of activities or access to required information
and any disagreements with management; |
| (b) |
any
accounting adjustments that were proposed by the independent accountants
that were not agreed to by the Company; |
| (c) |
communications
between the independent accountants and its national office regarding any
issues on which it was consulted by the audit team and matters of audit
quality and consistency; |
| (d) |
any
changes required in the planned scope of the internal audit; and
|
| (e) |
the
responsibilities, budget and staffing of the Company’s internal audit
function. |
| 8. |
Communicate
with the independent accountants regarding (a) alternative treatments
of financial information within the parameters of GAAP, (b) critical
accounting policies and practices to be used in preparing the audit report
and (c) such other matters as the SEC may direct by rule or
regulation. |
| 9. |
Periodically
consult with the independent accountants out of the presence of management
about internal controls and the fairness and accuracy of the
organization’s financial statements. |
| 10. |
Oversee
the relationship with the independent accountants by discussing with the
independent accountants the nature and rigor of the audit process,
receiving and reviewing audit reports and ensuring that the independent
accountants have full access to the Committee (and the Board) to report on
any and all appropriate matters. |
| 11. |
Discuss
with the independent accountants prior to the audit the general planning
and staffing of the audit. |
| 12. |
Obtain
a representation from the independent accountants that Section 10A of
the Securities Exchange Act of 1934 has been followed.
|
| D. |
Internal
Audit Control Matters |
| 1. |
Establish
regular and separate systems of reporting to the Committee by each of
management and the independent accountants regarding any significant
judgments made in management’s preparation of the financial statements and
the view of each as to appropriateness of such
judgments. |
| 2. |
Following
completion of the annual external audit, review separately with each of
management and the independent accountants any significant difficulties
encountered during the course of the audit, including any restrictions on
the scope of work or access to required
information. |
| 3. |
Review
with the independent accountants and management the extent to which
changes or improvements in financial or accounting practices have been
implemented. This review should be conducted at an appropriate time
subsequent to implementation of changes or improvements, as decided by the
Committee. |
| 4. |
Review
the procedures that the Company has implemented regarding compliance with
the Company’s code of conduct. |
| 5. |
Establish
procedures for the receipt, retention and treatment of accounting or
auditing complaints and concerns and anonymous submissions from employees
and others regarding questionable accounting or auditing matters.
|
| 6. |
Periodically
discuss with the chief executive officer and chief financial officer
(a) significant deficiencies in the design or operation of the
internal controls that could adversely affect the Company’s ability to
record, process, summarize and report financial data and (b) any
fraud that involves management or other employees who have a significant
role in the Company’s internal controls. |
| 7. |
Ensure
that no officer, director or any person acting under their direction
fraudulently influences, coerces, manipulates or misleads the independent
accountant for purposes of rendering the Company’s financial statements
materially misleading. |
While the
Committee has the responsibilities and powers set forth in this Charter, it is
not the duty of the Committee to plan or conduct audits or to determine that the
Company’s financial statements are complete and accurate and are in accordance
with GAAP. This is the responsibility of management and the independent
accountants.
| V. |
ANNUAL
EVALUATION PROCEDURES |
The
Committee shall annually assess its performance to confirm that it is meeting
its responsibilities under this Charter. In this review, the Committee shall
consider, among other things, (a) the appropriateness of the scope and
content of this Charter, (b) the appropriateness of matters presented for
information and approval, (c) the sufficiency of time for consideration of
agenda items, (d) frequency and length of meetings and (e) the quality
of written materials and presentations. The Committee may recommend to the Board
such changes to this Charter as the Committee deems appropriate.
| VI. |
INVESTIGATIONS
AND STUDIES |
The
Committee shall have the authority and sufficient funding to retain special
legal, accounting or other consultants (without seeking Board approval) to
advise and assist the Committee. The Committee may conduct or authorize
investigations into or studies of matters within the Committee’s scope of
responsibilities as described herein, and may retain, at the expense of the
Company, independent counsel or other consultants necessary to assist the
Committee in any such investigations or studies. The Committee shall have sole
authority to negotiate and approve the fees and retention terms of such
independent counsel or other consultants.
The
Company shall give appropriate funding, as determined by the Committee, for the
payment of (i) compensation to the outside auditor, legal, accounting or
other advisors employed by the Committee and (ii) ordinary administrative
expenses of the Committee that are necessary or appropriate in carrying out its
duties. Nothing contained in this Charter is intended to expand applicable
standards of liability under statutory or regulatory requirements for the
directors of the Company or members of the Committee. The purposes and
responsibilities outlined in this Charter are meant to serve as guidelines
rather than as inflexible rules and the Committee is encouraged to adopt such
additional procedures and standards as it deems necessary from time to time to
fulfill its responsibilities.