You are cordially invited to attend the 2017 Annual Meeting of
Shareholders of Carrizo Oil & Gas, Inc. to be held at 9:00 a.m., Central time, on Tuesday, May 16, 2017, at Two Allen Center,
The Forum, located at 1200 Smith Street, 12th Floor, Houston, Texas 77002.
On or about April , 2017, we will mail to our shareholders of record,
as of March 20, 2017, a Notice of Annual Meeting of Shareholders, our proxy statement, form of proxy card and our 2016 Annual Report
to Shareholders.
The Notice of Annual Meeting of Shareholders and the proxy statement describe the matters
to be acted upon during the meeting. We also encourage you to read our 2016 Annual Report to Shareholders.
We urge you to participate in the annual meeting and hope you will find it convenient
to attend in person. Whether or not you expect to attend, we encourage you to vote promptly. It is important to assure representation
of your shares at the meeting and the presence of a quorum. You may vote your shares by internet, by telephone or by mail. Instructions
regarding all three methods of voting are provided in our proxy statement and on the proxy card. If you hold your shares through
an account with a broker, bank, nominee, fiduciary or other custodian, please follow the instructions you receive from them to
vote your shares.
Thank you for your ongoing support and continued interest in Carrizo Oil & Gas, Inc.
The Company has fixed the close of business on March 20, 2017, as the record date
for determining shareholders entitled to notice of, and to vote at, such meeting or any adjournment thereof. You are
cordially invited to attend the meeting in person. However, even if you plan to attend the meeting, you are requested to read
the proxy materials and to vote by internet, by telephone or by mail using the instructions on the proxy card, or in the
manner prescribed by your broker or other nominee, as soon as possible. The proxy materials were first made available to
shareholders on or about April , 2017.
QUESTIONS
AND ANSWERS ABOUT THE PROXY MATERIALS
This proxy statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Carrizo Oil & Gas, Inc., a Texas corporation (the “Company,” “Carrizo”
or “we”), for use at its 2017 Annual Meeting of Shareholders (the “Annual Meeting”) to be held at 9:00
a.m., Central time, on Tuesday, May 16, 2017, at Two Allen Center, The Forum, located at 1200 Smith Street, 12th Floor, Houston,
Texas 77002, and any and all adjournments thereof, for the purposes set forth in the accompanying Notice of Annual Meeting of Shareholders
and as described below.
Why did you provide these proxy
materials to me?
We are providing these proxy materials to you because you were
either a registered holder or the beneficial owner of issued and outstanding shares of capital stock of the Company at the close
of business on the record date and therefore you or your broker or other nominee are entitled to receive notice of, and to vote
on all
matters at, the Annual Meeting and any adjournments thereof.
This proxy statement describes matters on which we would like you, as a shareholder, to vote. It also gives you information on
these matters so that you can make an informed decision.
What is the purpose of the
Annual Meeting?
At the Annual Meeting, shareholders will vote on the matters
outlined in the Notice of Annual Meeting of Shareholders, including the election of seven director nominees, a non-binding shareholder
advisory vote to approve the compensation of the Company’s named executive officers, a non-binding shareholder advisory vote
on the frequency of future advisory votes on executive compensation, approval of the amendment
to the Amended and Restated Articles of Incorporation of Carrizo
Oil & Gas, Inc., approval of the 2017 Incentive Plan of Carrizo Oil & Gas, Inc. (the “2017 Incentive Plan”),
and ratification of the selection of the Company’s independent registered public accounting firm. Also, management will be
available to respond to questions from shareholders.
What matters will be considered
at the Annual Meeting?
At the Annual Meeting, you will be voting on three proposals:
Proposal 1.
To elect seven members to the Board of Directors
to serve until the 2018 annual meeting of shareholders, until their successors are elected and qualified or until the earlier
of their death, resignation or removal.
Proposal 2.
To approve, in an advisory vote, the compensation
of the Company’s named executive officers.
Proposal 3.
To vote, on an advisory basis, on the frequency
of future advisory votes on executive compensation.
Proposal 4.
To approve the amendment to the Amended and
Restated Articles of Incorporation of Carrizo Oil & Gas, Inc. to increase the authorized shares.
Proposal 5.
To approve the 2017 Incentive Plan of Carrizo
Oil & Gas, Inc.
Proposal 6.
To ratify the appointment of KPMG LLP as
the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2017.
How does the Board recommend
that I vote?
Proposal 1.
The Board of Directors recommends that shareholders
vote “FOR” the election of the seven nominees for director.
Proposal 2.
The Board of Directors recommends that shareholders
vote “FOR” the approval, on a non-binding advisory basis, of the compensation of the Company’s named executive
officers.
Proposal 3.
The Board of Directors recommends that shareholders
select “1 YEAR” as the frequency of future advisory votes on the compensation of the company’s named executive
officers.
Proposal 4.
The Board of Directors recommends that shareholders
vote “FOR” the approval of the amendment
QUESTIONS
AND ANSWERS ABOUT THE PROXY MATERIALS
to the Amended and Restated Articles of Incorporation of
Carrizo Oil & Gas, Inc. to increase the authorized shares.
Proposal 5.
The Board of Directors recommends that shareholders
vote “FOR” the approval of the 2017 Incentive Plan of Carrizo Oil & Gas, Inc.
Proposal 6.
The Board of Directors recommends that shareholders
vote “FOR” the ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting
firm for the fiscal year ending December 31, 2017.
What vote is required for a
proposal to be approved?
Proposal 1.
The affirmative vote of a majority of the
votes cast by holders entitled to vote in the election of directors at the Annual Meeting is required for the election of each
nominee for director. With respect to the election of directors in an uncontested election, such as that being held at the Annual
Meeting, “majority of votes” cast means the number of votes cast “FOR” the election as a director of such
nominee exceeds the number of votes cast “AGAINST” such nominee. See also “Corporate Governance and Board Matters—Majority
Vote in Director Elections” for additional information regarding election of directors.
Proposal 2.
The affirmative vote of the holders of a
majority of the shares entitled to vote on and that vote for or against or expressly abstain with respect to the matter is required
to approve, on an advisory basis, the proposal relating to the advisory vote on the executive compensation of the Company’s
named executive officers. As an advisory vote, the shareholders’ vote on this proposal is not binding on our Board of Directors
or the Company. However, we expect that the Compensation Committee will review the voting results on such proposal and give consideration
to the outcome when making future decisions regarding compensation of the named executive officers.
Proposal 3.
The advisory vote on the frequency of future
advisory votes on executive compensation is a plurality vote. The Company will consider shareholders to have expressed a non-binding
preference for the frequency option that receives the most favorable votes. As an advisory vote, the shareholders’ vote
on this proposal is not binding on our Board of Directors or the Company. However, we expect that the Board of Directors will
review the voting results on such proposal and give consideration to the outcome when making future decisions regarding the frequency
of future advisory votes on compensation of the named executive officers.
Proposal 4.
The affirmative vote of the holders of a
majority of the shares entitled to vote on and that vote for or against or expressly abstain with respect to the matter is required
to approve the amendment to the Amended and Restated Articles of Incorporation.
Proposal 5.
The affirmative vote of the holders of a
majority of the shares entitled to vote on the matter is required to approve the 2017 Incentive Plan.
Proposal 6.
The affirmative vote of the holders of a
majority of the shares entitled to vote on the matter is required to approve the proposal relating to ratification of the Company’s
independent registered public accounting firm.
What is a proxy and how will
my proxy be voted? What is a proxy statement?
A proxy is another person or entity that you legally designate
to vote your shares. If you designate someone as your proxy in a written document, that document also is called a proxy or a proxy
card. All duly executed proxies received prior to the Annual Meeting will be voted in accordance with the choices specified thereon
and, in connection with any other business that may properly come before the meeting, in the discretion of the persons named in
the proxy.
A proxy statement is a document that the United States Securities
and Exchange Commission (“SEC”) requires that we make available to you when we ask you to vote your shares at the Annual
Meeting.
Who is entitled to vote at
the Annual Meeting?
The holders of record of the issued and outstanding shares of
capital stock of the Company at the close of business on the record date may vote on all matters at the Annual Meeting and any
adjournments thereof.
On the record date, 65,658,342 shares of common stock, par value
$0.01 per share (“Common Stock”) of the Company were issued and outstanding. No other class of stock is outstanding.
QUESTIONS
AND ANSWERS ABOUT THE PROXY MATERIALS
What is the record date and
what does it mean?
The record date for the annual meeting is March 20, 2017.
The record date is the date on which a shareholder must own shares as of record in order to be eligible for
notice of, and to vote at, an annual meeting. The record date
is fixed by the Board of Directors in accordance with Texas law.
What are the voting rights
of the holders of Common Stock?
Each share of Common Stock is entitled to one vote on each matter
submitted to a vote of shareholders. Votes cast by proxy or in person at the Annual Meeting will be
counted by the persons appointed as election inspectors for the
Annual Meeting.
How do I vote my shares?
Shareholders that are entitled to vote at the Annual Meeting
may do so in person at the Annual Meeting or by proxy submitted by Internet, by telephone or by mail using the instructions set
forth on the enclosed proxy card.
Shareholder of Record.
If you are a shareholder of record,
you may vote in person at the Annual Meeting or you can give a proxy to be voted at the meeting, over the telephone, by Internet,
or by mailing in a proxy card. Please refer to the specific voting instructions set forth on the enclosed proxy card. Even if
you currently plan to attend the Annual Meeting, we recommend that you also submit your proxy as described above so that your
vote will be counted if you later decide not to attend the Annual Meeting.
Street Name Holder.
If, like most of our shareholders,
you hold your shares in “street name,” you must vote your shares in the manner prescribed by your broker or other
nominee. Your broker or other nominee will enclose, or explain how you can access, a voting instruction card for you to use in
directing the broker or other nominee how to vote your shares. Since a beneficial owner is the shareholder of record, if you are
a “street name” holder, you may vote your shares in person at the Annual Meeting only if you obtain a signed proxy
from your broker or other nominee giving you a right to vote the shares.
What is the difference between
a shareholder of record and a “street name” holder?
Shareholder of Record.
If your shares are registered
directly in your name with Wells Fargo Shareowner Services, the Company’s stock transfer agent, you are considered the “shareholder
of record,” or a registered holder, with respect to those shares.
Street Name Holder.
If, like most of our shareholders,
your shares are held in a stock brokerage account, by a bank, fiduciary or other custodian, or by another nominee, you are considered
the beneficial owner of these shares, and
your shares are held in ‘‘street name.’’
In this case, such broker or other nominee is considered the shareholder of record for purposes of voting at the Annual Meeting.
As the beneficial owner, you have the right to instruct your broker or other nominee on how to vote the shares held in your account.
If you hold your shares through a broker or other nominee we recommend that you follow the directions provided by your broker
or other nominee to provide voting instructions.
How many shares must be present
or represented in order to hold and transact business at the Annual Meeting?
The presence, in person or by proxy, of the holders of a majority
of the shares entitled to vote at the Annual Meeting constitutes a quorum, which is required to transact business at the Annual
Meeting. Proxies indicating “abstentions” and shares represented by
“broker non-votes” will be counted for purposes of
determining whether there is a quorum at the Annual Meeting. The persons appointed as election inspectors will determine whether
a quorum exists.
QUESTIONS
AND ANSWERS ABOUT THE PROXY MATERIALS
What are broker non-votes and
how will they affect the vote on a proposal?
A “broker non-vote” occurs when a broker or other
nominee returns a valid proxy card without voting on such proposal because they did not receive voting instructions from the street
name owner and do not have discretionary authority to vote the shares on a particular proposal. Shares represented by broker non-votes
will not be voted on any proposal for which the broker or other nominee does not have discretionary authority to vote. Such shares
will be disregarded in the calculation of “votes cast” with respect to such proposal and therefore will have no effect
on the outcome of that proposal (even though those shares may be considered entitled to vote or be voted on other proposals). Under
applicable rules, brokers or other nominees have discretionary voting power with respect to matters that are considered routine,
but not with respect to non-routine matters. A broker or other nominee cannot vote without instructions on non-routine matters,
therefore there may be broker non-votes on any such proposals.
The proposals relating to the election of directors, the advisory
vote on executive compensation, the advisory
vote on the frequency of advisory votes on executive compensation,
and the approval of the 2017 Incentive Plan are non-routine proposals for which the broker or other nominee does not have discretionary
authority to vote their customers’ shares under applicable stock exchange rules and may result in broker non-votes. The broker
non-votes will have no effect on the outcome of these matters.
If you do not instruct your broker or other nominee how to vote
your shares, then they may vote your shares in their discretion on any matter for which they have discretionary authority under
applicable NASDAQ Stock Market Rules. The proposals relating to the approval of the amendment to the Amended and Restated Articles
of Incorporation and the ratification of the Company’s independent registered public accounting firm are routine proposals
for which the broker or other nominee has discretionary authority to vote their customers’ shares under applicable stock
exchange rules.
What are abstentions and how
will they affect the vote on a proposal?
An “abstention” occurs when the beneficial owner
of shares is present, in person or by proxy, and entitled to vote at the meeting (or when a broker or other nominee holding shares
for a beneficial owner is present and entitled to vote at the meeting), but such person refrains from voting as to a particular
proposal by indicating that he or she “abstains” as to that proposal. Abstentions will not be counted as votes cast
for the election of directors at the Annual Meeting and therefore will have no effect on the election of any nominee, and with
respect to the advisory vote on the frequency of advisory votes on
executive compensation, absentions will have no effect on the
outcome or the vote on the matter. With respect to the proposals relating to the advisory vote on executive compensation, the approval
of the amendment to the Amended and Restated Articles of Incorporation, the approval of the 2017 Incentive Plan, and the ratification
of the Company’s independent registered public accounting firm, holders that expressly “ABSTAIN” from voting
with respect to such proposals will have the same effect as a vote “AGAINST” the proposal.
What happens if I do not specify
how I want my shares voted?
As to any matter for which no choice has been specified in the
proxy, the shares represented thereby will be voted by the persons named in the proxy, to the extent applicable, (1) “FOR”
the election as a director of each nominee listed in this proxy statement; (2) “FOR” the approval, on an advisory basis,
of the compensation of the Company’s named executive officers; (3) the selection, on an advisory basis, of “1 YEAR”
as the frequency of future advisory votes on executive compensation; (4) “FOR”
the approval of the amendment to the Amended and Restated
Articles of Incorporation of Carrizo Oil & Gas, Inc.; (5) “FOR” the approval of the 2017 Incentive Plan of
Carrizo Oil & Gas, Inc.; (6) “FOR” the appointment of KPMG LLP as the Company’s independent registered
public accounting firm for the fiscal year ending December 31, 2017; and (7) in the discretion of the persons named in the
proxy in connection with any other business that may properly come before the Annual Meeting.
Are there any other matters
to be acted upon at the Annual Meeting?
As of the date of this proxy statement, the Board of Directors
is not aware of any matters that may be brought before the Annual Meeting other than those described above. By submitting a proxy
by internet, by telephone or by mail using the instructions on the enclosed proxy card, you give to the persons named in the form
of proxy
or their substitutes discretionary voting authority with respect
to any other business that may properly come before the Annual Meeting, and they intend to vote with respect to any such matters
in accordance with their best judgment.
QUESTIONS
AND ANSWERS ABOUT THE PROXY MATERIALS
Can I change my mind?
Shareholder of Record.
A shareholder of record giving
a proxy may revoke it at any time before it is voted at the Annual Meeting by delivering written notice to the Corporate Secretary
of the Company or by delivering a properly executed proxy bearing a later date. A shareholder of record who attends the Annual
Meeting may, if he or she wishes, vote by ballot at the Annual
Meeting and that vote will cancel any proxy previously given.
Attendance at the Annual Meeting will not in itself, however, constitute the revocation of a proxy.
Street Name Holder.
If you hold your shares in “street
name,” you should follow the directions provided by your broker or other nominee regarding how to revoke your proxy.
Where can I find the voting
results of the Annual Meeting?
The preliminary voting results will be announced at the Annual
Meeting. The final voting results will be tallied by the persons appointed as election inspectors and published within four business
days, via a Form 8-K
filed with the SEC and available to the public at the SEC’s
internet site at
www.sec.gov
, following the conclusion of the Annual Meeting.
CORPORATE GOVERNANCE
AND BOARD MATTERS
Our
Corporate Governance Practices
The Board of Directors and our Nominating and Corporate Governance
Committee periodically review our governance practices and regulatory or legislative initiatives related thereto, and adopt practices
that enhance our governance and risk profile, including:
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Annual
election of all directors.
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Majority
Vote Standard.
The Board has adopted a bylaw amendment requiring a majority
voting standard for the election of directors in uncontested elections and related policies
regarding director resignation.
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●
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Separate
Chairman of the Board and CEO.
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|
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Independent
Board.
Five of the seven members of our Board are independent.
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Lead Independent
Director.
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Independent
Board Committees.
Each of the Audit, Compensation and Nominating and Corporate
Governance committees of the Board is comprised entirely of independent directors.
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Committee
Charters.
Each standing committee operates under a written charter that has
been approved by the Board.
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Independent
Directors Meet Without Management and Non-Independent Directors.
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Minimum
Stock Ownership Guidelines.
Each named executive officer and non-employee
directors of the Company must continually own a minimum number of Company shares as set
forth below:
|
|
Position
|
Ownership
Guidelines
|
|
Chief Executive Officer
|
5x annual base salary
|
|
Chief Financial Officer
|
5x annual base salary
|
|
All other Named Executive Officers
|
3x annual base salary
|
|
Non-Employee
Directors
|
3x
annual cash retainer
|
Until the time the named executive officer or non-employee director
has reached their minimum ownership requirement, they are required to maintain at least 30% of the shares remaining after applying
payment to satisfy the elected tax withholding or for the exercise price of a stock option.
|
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●
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No Hedging
Company Securities.
No named executive officers or non-employee director of
the Company may hedge Carrizo Oil & Gas, Inc. securities, including publicly traded
options, puts, calls and short sales.
|
Leadership Structure
The Board of Directors believes our Company’s current leadership
structure, with Mr. S.P. Johnson IV serving as Chief Executive Officer, Mr. Steven A. Webster serving as Chairman of the Board
and Mr. F. Gardner Parker serving as Lead Independent Director, is the optimal structure for the Company at this time. From the
time that we became a publicly traded company in 1997, the roles of Chairman of the Board and Chief Executive Officer have been
held by separate individuals. We believe it is the Chief Executive Officer’s responsibility to lead the Company and the Chairman’s
responsibility to lead the Board of Directors. As directors continue to have more oversight responsibilities than ever before,
we believe it is beneficial to have a separate Chairman who has the responsibility of leading the Board. In addition, by having
another director serve as Chairman of the Board, our Chief Executive Officer is able to focus his energy on leading the Company.
Our bylaws provide that the Lead Independent Director will coordinate
and moderate executive sessions of the
Board of Director’s independent members and serve as the
principal liaison between the Chief Executive Officer and the independent directors on topics or issues as requested by a majority
of the independent directors, any committee of the Board of Directors or the entire Board of the Directors. Our Lead Independent
Director can also call meetings of independent directors.
We believe our Chief Executive Officer and our Chairman have
an excellent working relationship. We believe this relationship and separation provides strong leadership for the Board of Directors,
while also positioning our Chief Executive Officer as the leader of the Company in the eyes of our employees and other stakeholders.
Although the Board has determined that Mr. Webster is not independent under applicable NASDAQ Stock Market Rules, the Board believes
that this conclusion does not prevent Mr. Webster from exercising effective leadership in his role as Chairman of the Board and
is, in any event, in the best interests of the Company.
CORPORATE GOVERNANCE AND BOARD
MATTERS
Director
Independence
The Board has determined that Mr. Parker, Mr. Thomas L. Carter,
Jr., Mr. Robert F. Fulton, Mr. Roger A. Ramsey and Mr. Frank A. Wojtek are “independent directors” within the meaning
of NASDAQ Listing Rule 5605(a)(2). In making this determination, the Board took into account the transactions between the Company
and affiliates of Black Stone Minerals, L.P. described in “Related Party Transactions—Certain Matters Regarding Mr.
Carter.” The Board determined that these transactions did not result in a relationship that interferes with the exercise
of Mr. Carter’s independent judgment in carrying out
the responsibilities of a director of the Company and therefore
did not preclude a finding that Mr. Carter is independent. Until December 23, 2016, Mr. Fulton served on the Board of Directors
for Basic Energy Services, Inc., an oilfield service provider that performed services for the Company during 2016. The Board also
determined that this arrangement did not result in a relationship that interferes with the exercise of Mr. Fulton’s independent
judgment in carrying out the responsibilities of a director of the Company and therefore did not preclude a finding that Mr. Fulton
is independent.
Committees
of the Board of Directors, Composition and Meetings
The Board of Directors has an Audit
Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. The table below provides the current
composition of each standing committee of the Board:
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Name
|
Audit
|
Compensation
|
Nominating
and Corporate
Governance
|
|
F. Gardner Parker
|
Chairman
|
Member
|
|
|
Thomas L. Carter, Jr.
|
Member
|
|
Chairman
|
|
Robert F. Fulton
|
|
Member
|
Member
|
|
Roger A. Ramsey
|
Member
|
Chairman
|
|
|
Frank A. Wojtek
|
|
|
Member
|
|
Number of Committee Meetings Held in 2016
|
4
|
4
|
2
|
Audit Committee
The primary responsibilities of the Audit Committee are to oversee
the accounting and financial reporting processes and audit of the financial statements of the Company and to assist the Board of
Directors in monitoring (i) the integrity of the financial statements, (ii) the performance, independence and qualifications of
the independent registered public accounting firm, (iii) the performance of the Company’s internal audit function, and (iv)
the Company’s compliance with legal and regulatory requirements. The Audit Committee has sole authority to approve all engagement
fees and terms of the independent registered public accounting firm and to establish policies and procedures for pre-approval of
audit and non-audit services. The Audit Committee also reviews and discusses the annual audited financial statements, the quarterly
unaudited financial statements and internal control over financial reporting with management and the independent registered public
accounting firm. A copy of the Audit Committee Charter may be found on our website at
www.carrizo.com
under “About
Us - Governance.”
The Board has determined that all of the members of the Audit
Committee satisfy the independence standards under the NASDAQ Listing Rules and Rule 10A-3 of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”). In addition, the Board has determined that Mr. Parker is an “audit committee
financial expert,” as such term is defined in Item 407(d)(5)(ii) of Regulation S-K promulgated by the SEC. Mr. Parker is
a certified public accountant and served as partner in a major accounting firm.
CORPORATE
GOVERNANCE AND BOARD MATTERS
Compensation
Committee
The primary responsibilities of the Compensation Committee
are (i) to review and approve the compensation of our executive officers and directors, (ii) to oversee and advise the Board
on the policies that govern our compensation programs, and (iii) to administer the Company’s incentive compensation
plans. The Compensation Committee has the authority to select, retain, terminate, and approve the fees and other retention
terms of special counsel, compensation consultants or other experts or consultants, as it deems appropriate, without seeking
approval of the Board of Directors or management. The Compensation Committee has historically retained an independent
compensation consulting firm to provide the Compensation Committee with market data and recommendations regarding our
executive and director compensation programs when the Compensation Committee considers compensation of the named executive
officers and directors. The Compensation Committee retained Longnecker & Associates (“Longnecker”) for
compensation recommendations in 2014, 2015 and 2016 and retained Pearl Meyer & Partners, LLC (“Pearl Meyer”)
for compensation recommendations in 2017. Our Chief Executive Officer annually reviews the performance of our named executive
officers, other than himself,
and makes recommendations to the Compensation Committee regarding
base salary adjustments, annual bonuses and long-term incentive awards for such other named executive officers.
The Compensation Committee has been appointed by the Board of
Directors to administer the Incentive Plan of Carrizo Oil & Gas, Inc., as amended and restated effective May 15, 2014 (the
“Prior Incentive Plan”), the Carrizo Oil & Gas, Inc. Cash-Settled Stock Appreciation Rights Plan (the “Cash
SAR Plan”), and, if approved by the shareholders, the 2017 Incentive Plan, subject in some cases to action by the full Board.
The Board of Directors has designated a special stock award committee of the Board consisting solely of Mr. Johnson to determine
whether and how much to award certain eligible participants, excluding “officers” (as defined in Rule 16a-1 promulgated
under Section 16 of the Exchange Act) and directors, shares of restricted stock, restricted stock units (“RSUs”), options
and stock appreciation rights (“SARs”) under the Prior Incentive Plan, the Cash SAR Plan, and, if approved by the shareholders,
the 2017 Incentive Plan, up to an aggregate of 15,000 shares per quarterly calendar period. A copy of the Compensation Committee
Charter may be found on our website at
www.carrizo.com
under “About Us - Governance.”
Nominating
and Corporate Governance Committee
The primary responsibilities of the Nominating and Corporate
Governance Committee include (i) identifying, evaluating and recommending, for the approval of the entire Board of Directors, potential
candidates to become members of the Board of Directors, (ii) recommending membership on standing committees of the Board of Directors,
(iii) developing and recommending to the entire Board of Directors corporate governance principles and practices for the Company
and assisting in the implementation of such policies, and (iv) assisting
in the identification, evaluation and recommendation of potential
candidates to become officers of the Company. The Nominating and Corporate Governance Committee reviews the Company’s Code
of Ethics and Business Conduct and its enforcement and reviews and recommends to the Board whether waivers should be made with
respect to such Code. A copy of the Nominating and Corporate Governance Committee Charter may be found on our website at
www.carrizo.com
under “About Us - Governance.”
Meetings and Attendance
The Board of Directors held four meetings during 2016 and transacted
business on four occasions during the year by unanimous written consent. During 2016, each director attended at least 75% of the
aggregate of the total number of Board of Directors’ meetings and of meetings of committees of the Board of Directors on
which he served that were held during his service on the Board of Directors.
Non-employee directors ordinarily meet in executive session without
management present at most regularly scheduled Board meetings. Additionally, the independent
directors periodically meet without management or non- independent
directors present at regularly scheduled Board meetings and may meet at other times at the discretion of the Lead Independent Director,
a majority of the independent directors, any committee of the Board of Directors or the entire Board of the Directors.
The Company does not have a policy regarding director attendance
at annual meetings of shareholders. All of the Company’s directors attended the 2016 Annual Meeting of Shareholders in person.
CORPORATE GOVERNANCE AND BOARD
MATTERS
The Board’s Role in Risk
Oversight
The Board of Directors generally oversees risk management, and
the Chief Executive Officer and other members of executive management generally manage the material risks that we face. The Board
of Directors focuses on the most significant risks facing the Company and the Company’s general risk management strategy,
and also ensures that risks undertaken by the Company are consistent with the Board’s risk tolerance.
Responsibility for risk oversight generally rests with the entire
Board of Directors. Risks falling within this area would include but are not limited to business ethics, general business and industry
risks, operating risks and financial risks. We have not concentrated responsibility for all risk management in a single risk management
officer, but rather rely on various executive and other management personnel to understand, assess, mitigate and generally manage
material risks that we face in various areas including capital expenditure plans, liquidity, operations and health, safety and
environmental. These personnel report to the Board of Directors, as appropriate, regarding material risks and our management of
those risks. The Board of Directors monitors the risk management information provided to it and provides feedback to management
from time to time.
The standing committees of the Board assist the Board of Directors
in managing specific risk areas. The Audit Committee assists the Board of Directors in oversight of the integrity of the Company’s
financial statements and various matters relating to our publicly available financial information and our internal and independent
auditors. The Audit Committee also evaluates related party transactions and potential conflicts of interest. The Audit Committee
receives information from our employees and others regarding public disclosure, our internal controls over financial reporting
and material violations of law. Certain risks associated with our governance fall within the authority of the Nominating and Corporate
Governance Committee, which is responsible for evaluating independence of directors and Board candidates. Risks associated with
retaining and incentivizing management fall within the scope of the authority of the Compensation Committee, which assists the
Board of Directors in reviewing and administering compensation, benefits, incentive and equity-based compensation plans. These
committees receive reports from management periodically regarding management’s assessment of risks and report regularly to
the full Board of Directors.
Majority Vote in Director Elections
The Company’s bylaws provide that in an election of directors
at a meeting of shareholders at which a quorum is present, (a) if the number of nominees exceeds the number of directors to be
elected (a “contested election”), the members of the Board of Directors that are elected by shareholders will be elected
by a plurality of the votes cast by the holders of shares entitled to vote in the election of directors at such meeting and (b)
in an election of directors that is not a contested election (an “uncontested election”), the members of the Board
of Directors that are elected by shareholders shall be elected by a majority of the votes cast by the holders of shares entitled
to vote in the election of directors at such meeting. For purposes of the bylaws, in an uncontested election of directors a “majority
of votes cast” shall mean that the number of shares voted “for” a director exceeds the number of votes cast “against”
that director.
The Company’s Code of Ethics and Business Conduct provides
that, as a condition to being nominated to continue to serve as a director, whether by the Board of Directors or by shareholder,
an incumbent director nominee will agree that if such incumbent director nominee fails to receive the required vote for election
to the Board of Directors at the next meeting of the shareholders of the Company at which such nominee faces re-election, he or
she will submit to the Board of Directors an irrevocable letter of resignation that would be effective upon, and only in the event
that the Board of Directors accepts, such resignation.
The Board of Directors will decide whether to accept or reject
such resignation, or whether other action should be taken, taking into account the recommendation of the Nominating and Corporate
Governance Committee of the Board of Directors and will publicly disclose (by a press release, a filing with the SEC or other broadly
disseminated means of communication) its decision regarding the tendered resignation and the rationale behind the decision within
90 days from the date of the certification of the election results.
CORPORATE
GOVERNANCE AND BOARD MATTERS
Code of Ethics and Business
Conduct
The Nominating and Corporate
Governance Committee developed and recommended to the Board a Code of Ethics and Business Conduct, which the Board has
adopted. The Code of Ethics and Business Conduct is applicable to all employees, officers and directors and satisfies the
requirements of NASDAQ Listing Rule 5610. Any waiver of, or amendment to, the Code of Ethics and Business Conduct of the
Company may be approved only by the Board and will be promptly
disclosed as required by law, the regulations of the SEC, and
the NASDAQ Stock Market Rules. Such waivers will be disclosed promptly by posting to our website. The Nominating and Corporate
Governance Committee also reviews and may recommend to the Board waivers of, or amendments to, the Code of Ethics and Business
Conduct. The Code of Ethics and Business Conduct is available on the Company’s website at
www.carrizo.com
under “About
Us - Governance.”
Shareholder
Communication with the Board of Directors
Shareholders may communicate with the Board by submitting their
communications in writing, addressed to the Board as a whole or, at the election of the shareholder, to one or more specific directors,
c/o Corporate Secretary, Carrizo Oil & Gas, Inc., 500 Dallas Street, Suite 2300, Houston, Texas 77002.
The Audit Committee of the Board of Directors has established
procedures for the receipt, retention and treatment of complaints regarding accounting, internal
accounting controls, or auditing matters.
Shareholders who wish to submit a complaint under these procedures should submit the complaint in writing to: F. Gardner Parker,
Chairman of the Audit Committee, Carrizo Oil & Gas, Inc., 500 Dallas Street, Suite 2300, Houston, Texas 77002. The Company
also has a hotline by which employees can confidentially communicate illegal and unethical activities including concerns or complaints
regarding the matters noted above. The phone number is 877-888-0002.
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
Executive
Summary
The Compensation Committee of our Board
of Directors oversees our compensation program. Our compensation program is designed to specifically address our desire to motivate
and retain all of our employees.
Our executive compensation program covers
our President and Chief Executive Officer (“CEO”), our principal executive officer, our Vice President & Chief
Financial Officer (“CFO”), our principal financial officer, and our other three most highly-compensated executive officers
during the last fiscal year (collectively, the “Named Executive Officers”).
Our executive compensation program is designed
to pay our Named Executive Officers a significant amount of their compensation in equity of the Company in order to incentivize
them to consistently build long-term
shareholder value and to align our executives
with our shareholders. The following Compensation Discussion and Analysis explains how the Compensation Committee has structured
our executive compensation program to achieve this objective.
Although this section of the proxy statement
specifically addresses the compensation program of our Named Executive Officers, we are focused on the compensation of all of
our employees and structuring all of our compensation programs to reward behavior that we believe will ultimately increase shareholder
value, and the Compensation Committee considers compensation programs of all of our employees with the focus of tying a substantial
portion of compensation to the Company’s performance and creation of shareholder value.
2016
Performance Highlights
Summarized below are some of the many objectives
we accomplished during 2016 that we believe will help us continue to navigate the Company through a challenging commodity price
environment.
|
|
●
|
Increased average daily oil production 12% year- over-
year to 25,745 Bbls/d in 2016, exceeding our initial expectations of 8% growth, despite reducing capital expenditures by 21% compared
to the prior year;
|
|
|
●
|
Reduced average well costs in the Eagle Ford from $4.6
million at year-end 2015 to $4.1 million at year-end 2016;
|
|
|
●
|
Utilizing new Generation 3 rigs, increased drilling rate
by approximately 40% to approximately 3.5 wells per rig per month by year-end 2016;
|
|
|
●
|
Exited 2016 with a record 200.2 MMBoe of proved reserves;
|
|
|
●
|
Grew our Eagle Ford net acreage position to 100,195 net
acres at year-end 2016, which included net bolt-on acres acquired from an affiliate of Sanchez Energy Corporation located primarily
in the core volatile oil window of the Eagle Ford; and
|
|
|
●
|
De-risked a large portion of our Delaware Basin acreage
position, adding material potential drilling locations to our drilling inventory.
|
EXECUTIVE
COMPENSATION
Pay
For Performance: Total Shareholder Return
The oil and gas industry experienced
a continued low commodity price environment in 2016 stemming in large part from the global oversupply of crude oil. Although
this challenging environment led to production declines for many domestic exploration and production companies, our
management team was able to deliver another year of production and reserve growth in 2016. These accomplishments are
attributable to our management team’s ability to maintain financial flexibility, control costs and continue to improve
the
efficiency of our drilling and completion
operations in the Eagle Ford Shale, one of the highest return plays in the U.S. The following graph presents a comparison of total
shareholder returns of the Company’s common stock, the average returns of our 2015 and 2016 compensation peer groups, and
the S&P 500 and Dow Jones U.S. Exploration and Production indexes, assuming an investment of $100 (with reinvestment of all
dividends) was invested on December 31, 2011.
As shown above, we have outperformed
our 2015 and 2016 compensation peer groups, as well as the Dow Jones U.S. Exploration and Production Index, over the
cumulative five-year period. We view this as a testament to management’s ability to position the Company for success
during a challenging environment and will allow
Carrizo to emerge from this commodity price
downcycle in a strong position. See “Executive Compensation Philosophy, Goals and Objectives—Compensation Should Be
Benchmarked” for information about our 2016 Compensation Peer Group.
EXECUTIVE
COMPENSATION
Pay-for-Performance:
Increased At-Risk Compensation
The
Compensation Committee reviews and adjusts the compensation of our executives each year to ensure continued alignment with the
goals and objectives of the Company, as well as motivate executives to maximize
long-term
value creation for our shareholders. This has been accomplished by continuing to implement compensation programs weighted towards
at-risk, variable compensation.
2016
Shareholder Advisory Vote on Executive Compensation
At
our 2016 annual meeting of shareholders, holders of 79.5% of the shares entitled to vote on the matter voted in favor of the compensation
of the named executive officers as described in our 2016 proxy statement. The Compensation Committee believes that the level of
support received from our shareholders indicates that they consider our compensation philosophy and our executive compensation
policies to be effective and aligned with their interests. Although the results of this advisory vote indicated that no change
to our executive compensation program was necessary, the Compensation
Committee
also considered compensation decisions made by our compensation peer group, information provided by its independent compensation
consultant and public commentary of institutional investors, when determining whether changes to our executive compensation program
were necessary in 2017. The Compensation Committee will continue to monitor and consider the outcomes of the annual advisory votes
on our executive compensation program when making compensation decisions for our executives in the future.
Executive
Compensation Program and Corporate Governance Highlights
We
believe our annual incentive bonus and long-term equity-based incentive awards for 2016 continue to align our executives’
compensation with the interests of our shareholders. Additionally, the following table summarizes the compensation best practices
that we follow and the disfavored compensation practices that we avoid.
|
Compensation
Best Practices That We Follow
|
|
☑
|
Majority
“at risk” or variable compensation.
The majority of our executive compensation is “at
risk” or variable. Our annual incentive bonus is based on performance against key operational and financial metrics
that drive both our short-term and long-term corporate strategy. The value delivered by our long-term equity based incentive
awards is tied to both absolute and relative shareholder return performance.
|
|
☑
|
Significant
Equity-Based Compensation.
A significant portion of our executive compensation is equity-based, with the majority
of the value settled based on a combination of our absolute and relative total shareholder return.
|
|
☑
|
Stock
Ownership Guidelines.
Named executive officers and non-employee directors are required to maintain meaningful ownership
of our stock to ensure their interests are closely aligned with the long-term financial interests of our shareholders.
|
|
☑
|
Independent
Compensation Committee.
Our Compensation Committee is comprised solely of independent
directors.
|
|
☑
|
Independent
Compensation Consultant.
The Compensation Committee retains an independent compensation consultant who provides
no other services to the Company.
|
|
☑
|
Compensation
Benchmarking.
The Compensation Committee annually reviews an analysis of
executive compensation prepared by its independent compensation consultant using competitive compensation data based
on relevant peer company and survey data to ensure our executive compensation program is designed appropriately and takes
into account market changes.
|
|
☑
|
Compensation
Risk Assessment.
There is an appropriate balance between long-term and short-term focus in our compensation programs
and the Compensation Committee has the ability to exercise discretion to ensure risk mitigation occurs in management decision
making.
|
|
☑
|
Clawback
Policy.
The Board of Directors is committed to adopting a clawback policy as required by Section 954 of the Dodd-Frank
Wall Street Reform and Consumer Protection Act of 2010 if and when final regulations have been adopted by the SEC and NASDAQ.
|
|
☑
|
Minimal
Perquisites.
We provide minimal perquisites to our named executive officers that are not generally available to all
other employees.
|
EXECUTIVE
COMPENSATION
|
Disfavored
Compensation Practices That We Avoid
|
|
☒
|
No
Liberal Share Recycling.
Neither the Prior Incentive Plan nor the 2017 Incentive Plan, if approved by the shareholders,
contains liberal share recycling.
|
|
☒
|
No
Repricing.
No repricing or exchange of underwater stock options or SARs or other awards is permitted without shareholder
approval.
|
|
☒
|
No
Payment of Dividends Prior to Vesting.
No payment of dividends prior to the vesting of restricted stock or
performance shares.
|
|
☒
|
No
Hedging or Derivatives Trading of the Company’s Securities.
No hedging of the Company’s securities,
including publicly traded options, puts, calls and short sales by named executive officers or non-employee directors permitted.
|
|
☒
|
No
Guaranteed Bonus.
No guaranteed annual incentive bonus and no cash retention bonus for named executive officers.
|
|
☒
|
No
Future Agreements to Provide Tax Gross-ups.
The Board adopted a policy in May 2011 that employment agreements
entered after the adoption of such policy would not contain provisions entitling employees to tax gross-up payments.
|
|
☒
|
No
Supplemental Executive Retirement Benefits.
We do not provide pensions or other supplemental executive retirement
benefits to our named executive officers.
|
The
Compensation Committee oversees the Company’s compensation programs, administers the Company’s Cash SAR Plan, Prior
Incentive Plan, and if approved by the shareholders, the 2017 Incentive Plan and reviews and approves all compensation decisions
relating to our executives, including all grants of equity-based awards. The Compensation Committee is empowered by the Board
of Directors and by the Compensation Committee’s Charter to make all the decisions regarding compensation for executives
without ratification or other action by the Board of Directors. The Compensation Committee also advises the Board of Directors
on the adoption of policies that govern the Company’s compensation programs.
The
Compensation Committee is composed entirely of independent non-employee members of the Board of Directors. The Nominating and
Corporate Governance Committee recommended the appointment of these directors to serve on the Compensation Committee after determining
that they had the independence, knowledge and skills to accomplish the scope of responsibilities set out in the Compensation Committee’s
Charter.
The
Compensation Committee regularly meets with its independent compensation consultant, Longnecker in 2014-2016 and Pearl Meyer in
2017, who assists and advises the Compensation Committee on all aspects of its executive compensation program. The services the
independent compensation consultant provides include:
|
|
●
|
analyzing
the appropriateness of the Company’s compensation peer group and stock performance peer group (discussed below);
|
|
|
●
|
providing
and analyzing competitive market compensation data;
|
|
|
●
|
analyzing
the effectiveness of executive compensation programs and making recommendations to the Compensation Committee, as necessary; and
|
|
|
●
|
evaluating
how well our compensation programs adhere to the philosophies and principles of the Company.
|
The
Compensation Committee also receives data, advice and counsel from the independent compensation consultant on matters pertaining
to non-employee director compensation.
Executive
Compensation Philosophy, Goals and Objectives
Objectives
The
guiding philosophy and specific objectives of our executive compensation program are: (i) to align executive compensation design
and outcomes with our business strategy; (ii) to encourage management to create sustained value for our shareholders; (iii) to
attract, retain, and engage our executives; and (iv) to support a performance-based culture for all of our employees. These primary
objectives are evaluated annually by: (a) measuring and managing executive compensation; (b) aligning incentive plan goals with
shareholder
value-added measures; and (c) having an open and objective discussion between management and the Compensation Committee in setting
goals for and measuring performance of the executive officers.
We
believe that each of these objectives is important to our compensation program. Our compensation program is designed to reward
our executives for meeting or exceeding short-term performance targets and furthering the long-term strategy of the Company
EXECUTIVE
COMPENSATION
without
subjecting the Company to excessive or unnecessary risks. Specifically, the components of our executives’ compensation,
such as base salaries, annual incentive bonuses and long-term equity-based incentive awards, are evaluated and determined on a
periodic basis to ensure the amount and type of compensation received by each executive corresponds to the executive’s performance
and targets for the Company’s performance.
Our
goal is to establish executive base salaries near the 50th percentile and total direct compensation between the 50th and 75th
percentiles of executives in comparable positions in our compensation peer group. Total direct compensation includes base salary,
annual incentive bonus and grant date fair value of long-term equity based incentive compensation and includes both targeted total
direct compensation (based on annual incentive bonus targets) and actual total direct compensation (based on annual incentive
bonus actually paid).
Based
on an assessment of individual performance, responsibilities, experience, leadership, contributions, company performance and compensation
data of executives in comparable positions in our compensation peer group, our CEO makes recommendations to the Compensation Committee
for adjustments to base salaries, annual incentive bonus targets and
long-term
incentive awards for executives other than himself. The Compensation Committee considers the recommendations of our CEO along
with their assessment of the CEO’s performance and compensation data of our compensation peer group in setting our executive
compensation.
Based
on a review of 2016 actual total direct compensation, in March 2017, the Compensation Committee observed that the actual
total direct compensation paid to the Company’s executives was below the 50th percentile of executives in our
compensation peer group. This was primarily due to a maximum payout level of our annual incentive bonus that was
substantially below that of our compensation peer group. Therefore, to better align the Company’s 2017 total direct
compensation of our executives with that of our compensation peer group, the Compensation Committee exercised its
discretionary authority by changing the maximum payout of our annual incentive bonus effective with the 2016 annual incentive
bonus. See “Annual Incentive Bonus” below for further discussion. Compensation practices and philosophies are
evolving and additional changes may be required in the future in order to maintain executive compensation levels that are
competitive with the market.
Compensation
Should Be Benchmarked
The
Compensation Committee engages its independent compensation consultant to annually review the composition of the compensation
peer group used for executive compensation decisions. This process considers potential peers based on several metrics, including
oil and gas revenue, assets, proved oil and gas reserves, capital expenditures, market capitalization, enterprise value and operational
similarity. Potential peer companies are narrowed down to those generally within a range of 0.5 to 3.0 times the Company for the
various metrics with final peer company selections made based on discussions with management. The resulting compensation peer
group is reviewed and approved by the Compensation Committee.
The
compensation peer groups used for executive compensation decisions in 2017, 2016 and 2015 are presented in the table below. From
2015 to 2016, seven companies were removed from the compensation peer group, one as a result of being acquired and the others
due to significant decline in size as a result of the depressed commodity price environment and ten companies were added to the
compensation peer group which better aligned with the Company with respect to the various metrics described above. We decided
to increase the number of companies in the compensation peer group from 13 to 16 to achieve a compensation peer group size that
was more in line with the size used by our peer group. From 2016 to 2017, one company was removed from the compensation peer group
and one company was added for the same reasons discussed above.
EXECUTIVE
COMPENSATION
|
|
2015
Compensation
Peer Group
|
|
2016
Compensation
Peer Group
|
|
2017
Compensation
Peer Group
|
|
Bill Barrett Corporation
|
X
|
|
X
|
|
X
|
|
Bonanza Creek Energy, Inc.
|
X
|
|
X
|
|
|
|
Comstock Resources, Inc.
|
X
|
|
|
|
|
|
Diamondback Energy, Inc.
|
|
|
X
|
|
X
|
|
EP Energy Corporation
|
|
|
|
|
X
|
|
EXCO Resources, Inc.
|
X
|
|
|
|
|
|
Gulfport Energy Corporation
|
X
|
|
X
|
|
X
|
|
Halcòn Resources Corporation
|
X
|
|
|
|
|
|
Laredo Petroleum, Inc.
|
X
|
|
X
|
|
X
|
|
Matador Resources Company
|
|
|
X
|
|
X
|
|
Midstates Petroleum Company, Inc.
|
X
|
|
|
|
|
|
Northern Oil and Gas, Inc.
|
X
|
|
|
|
|
|
Oasis Petroleum Inc.
|
X
|
|
X
|
|
X
|
|
Parsley Energy, Inc.
|
|
|
X
|
|
X
|
|
PDC Energy, Inc.
|
X
|
|
X
|
|
X
|
|
Range Resources Corporation
|
|
|
X
|
|
X
|
|
Rice Energy Inc.
|
|
|
X
|
|
X
|
|
Rosetta Resources Inc.
(1)
|
X
|
|
|
|
|
|
RSP Permian, Inc.
|
|
|
X
|
|
X
|
|
Sanchez Energy Corporation
|
|
|
X
|
|
X
|
|
SM Energy Corporation
|
|
|
X
|
|
X
|
|
Swift Energy Company
|
X
|
|
|
|
|
|
Whiting Petroleum Company
|
|
|
X
|
|
X
|
|
WPX Energy, Inc.
|
|
|
X
|
|
X
|
|
|
(1)
|
Effective
July 20, 2015, Rosetta Resources, Inc. was acquired by Noble Energy, Inc.
|
The
Compensation Committee uses compensation data from the compensation peer group, supplemented with published industry survey data
when necessary, to benchmark our executives’ base salary, annual incentive bonus, long-term equity-based incentive compensation
and total direct compensation. Additionally,
the
Compensation Committee uses this compensation data to ensure that compensation decisions are appropriate, reasonable and consistent
with the Company’s compensation philosophy, goals and objectives, considering the labor market in which we compete for executive
talent.
Executive
Compensation Components
The Compensation Committee believes that compensation paid
to our named executive officers, should be competitive with the compensation peer group and closely aligned with our performance
on both a short-term and long-term basis. Our executive compensation program is also designed to assist us in attracting and retaining
highly qualified executives critical to our long-term success and motivating them to maximize shareholder return. To that end,
the Compensation Committee believes that the compensation of the named executive offices should consist of the following components:
|
●
|
annual incentive
bonus;
|
|
●
|
long-term
equity-based incentive awards;
|
|
●
|
severance and change of control benefits; and
|
|
●
|
perquisites and other benefits.
|
Base
Salary
A
competitive base salary is the foundation of our executive compensation program. Base salaries are intended to help attract highly
qualified candidates and provide a stable source of income so our executives can focus on day-to-day job responsibilities.
After
considering the recommendations of our CEO for adjustments to base salaries for executives other than himself, and compensation
data of our compensation peer group provided by its independent compensation
consultant,
in March 2017, the Compensation Committee approved increases to the base salaries of the named executive officers as set forth
below, with increases effective April 2, 2017. The increases in base salaries were based on the Compensation Committee’s
decision that our executives’ individual performances, corporate performance, industry inflation, and the competitive aspects
of the oil and gas industry warranted the increases with individual adjustments determined with reference
to competitive market data by position and our goal of targeting base salaries that approximate the 50th percentile of our compensation
peer group.
EXECUTIVE
COMPENSATION
|
|
2015
Base Salary
|
|
2016
Base Salary
|
|
|
2017
Base Salary
|
|
S. P. Johnson IV
|
$650,000
|
|
$650,000
|
|
|
$670,000
|
|
Brad Fisher
|
470,000
|
|
470,000
|
|
|
485,000
|
|
David L. Pitts
|
350,000
|
|
390,000
|
(1)
|
|
430,000
|
|
Gerald A. Morton
|
371,000
|
|
371,000
|
|
|
383,000
|
|
Richard H. Smith
|
335,000
|
|
335,000
|
|
|
346,000
|
|
|
(1)
|
Effective
May 1, 2016, Mr. Pitts’ base salary was increased to $390,000 from $350,000.
|
Annual
Incentive Bonus
Executives
are eligible for an annual incentive bonus which is considered performance based compensation under Section 162(m) of the Internal
Revenue Code of 1986, as amended (the “Code”) and is designed to focus executives on achieving our annual corporate plan linked to our strategy.
Execution against our annual corporate plan is important to drive longer term shareholder value by creating financial strength,
managing costs, and investing in projects that will deliver future value. We employ balanced performance metrics to further specific
objectives of our strategy, such as achievement of plan, cost management, cash flow and capital efficiency.
Annual
incentive bonus targets, expressed as a percentage of base salary, are established for each executive. The Compensation Committee
approves the targets for each executive considering recommendations of our CEO for adjustments to the targets for executives other
than himself, and compensation data of our compensation peer group provided by its independent compensation consultant. In March
2016, the Compensation Committee approved the following 2016 annual incentive bonus target for each executive:
|
Named
Executive Officer
|
2016
Target
Bonus Level
% of Base Salary
|
|
S.P.
Johnson IV
|
100%
|
|
Brad
Fisher
|
90%
|
|
David
L. Pitts
|
90%
|
|
Gerald
A. Morton
|
90%
|
|
Richard
H. Smith
|
80%
|
Each
year, the Compensation Committee establishes performance metrics and targets for executives’ annual incentive bonuses. The
targets established by the Compensation Committee are calculated differently than the annual guidance the Company may include
in earnings releases or public filings. In March 2016,
the
Compensation Committee approved the 2016 target levels for each performance metric which were based on the Company’s 2016
corporate plan and the Compensation Committee’s discussions with Longnecker. The table below sets forth the 2016 performance
metrics, targets and the Company’s 2016 actual results.
|
2016 Operational and Financial
Metrics
|
Target
|
|
Actual
|
|
Average Daily Oil Production (Bbls/d)
|
23,465
|
|
25,681
|
|
Drill-Bit Finding and Development Cost ($/Boe)
|
$11.69
|
|
$11.40
|
|
Lease Operating and General and Administrative
Expense ($/Boe)
|
$11.03
|
|
$9.06
|
Based
on the advice of Longnecker, our independent compensation consultant at the time, and consistent with prior years, in March 2016,
the Compensation Committee determined that each executive’s annual incentive bonus opportunity would range from zero to
100% of target depending on the Company’s actual results versus the performance metric targets. The actual bonus paid could
be more or less than the payout indicated based on actual results as determined by the Compensation Committee in its discretion.
EXECUTIVE
COMPENSATION
In
March 2017, Pearl Meyer, our new independent compensation consultant, observed that the executive annual incentive bonus opportunity
of substantially all of the companies included in our compensation peer group ranged from zero to 200% of target. Therefore, while
our executives’ annual incentive bonus targets were in line with the compensation peer group, primarily due to the maximum
payout level of our annual incentive bonus of 100% of target, 2015 annual incentive bonuses actually paid by our compensation
peer group significantly exceeded the 2015 annual incentive bonuses paid by the Company.
In
March 2017, the Compensation Committee considered the 2016 annual incentive bonus payouts for executive officers based on
2016 actual results using the 2016 performance metrics, targets and payout levels established by the Compensation Committee
in March 2016 (which was 110% of target) and compared them to what they would have been if the 2016 performance metrics,
targets and payout levels had been established consistent with those determined by the Compensation Committee for 2017 as set
forth below (which was 153% of target).
To
better align the Company’s 2017 total direct compensation of our executives with that of our
compensation
peer group, and consistent with the Company’s compensation philosophy described in this Compensation Discussion and
Analysis, the Compensation Committee determined in March 2017 that it was appropriate to change the maximum payout of our
annual incentive bonus from 100% to 200% for 2016 and 2017 and apply consistent performance metric targets and payout levels
effective with the 2016 annual incentive bonus.
Nevertheless,
in spite of achieving 2016 actual results at 153% of targeted performance levels (utilizing 2016 performance metrics, targets
and payout levels consistent with those determined for 2017), management recommended, and the Compensation Committee approved,
the exercise of negative discretion to reduce the payout of the 2016 annual incentive bonuses to 125% of the newly established
target due to the continued depressed commodity price environment. Further, management proposed, and the Compensation Committee
approved, the annual incentive bonus be paid 75% in cash and 25% in RSUs that vested substantially concurrent with the time of
grant. See “Executive Compensation—Summary Compensation Table” for further details. The actual payout for each
named executive officer is set forth below:
|
Named Executive Officer
|
Target
Payout
|
|
Actual
Payout
|
|
S.P. Johnson IV
|
$650,000
|
|
$812,500
|
|
Brad Fisher
|
423,000
|
|
528,750
|
|
David L. Pitts
|
351,000
|
|
438,750
|
|
Gerald A. Morton
|
333,900
|
|
417,375
|
|
Richard H. Smith
|
268,000
|
|
335,000
|
The
Compensation Committee has approved the following performance metrics, targets and payout levels for executives’ 2017 annual
incentive bonus. The performance metric targets were based on the Company’s 2017 corporate plan and the Compensation Committee’s
discussions with Pearl Meyer. These performance metrics are substantially the same as those used to determine annual incentive
bonuses for all Carrizo employees.
|
2017
Operational and Financial Metrics
|
Threshold
(50%)
|
|
Target
(100%)
|
|
Maximum
(200%)
|
|
Average Daily Oil Production (Bbls/d)
|
31,400
|
|
31,650
|
|
33,495
|
|
Drill-Bit Finding and Development
Cost ($/Boe)
|
$14.00
|
|
$13.00
|
|
$11.40
|
|
Lease
Operating and General and Administrative Expense ($/Boe)
|
$10.50
|
|
$10.13
|
|
$9.26
|
Each
executive’s 2017 annual incentive bonus payout opportunity will range from zero to 200% of target depending on the Company’s
actual results versus the performance metric targets. The actual bonus paid could be more or less than the payout indicated based
on actual results as determined by the Compensation Committee in its discretion.
Long-Term
Equity-Based Incentive Awards
The
objectives of our long-term incentive plan are to attract and retain the services of executives, encourage a sense of proprietorship,
stimulate the active interest in our development and financial success, and align their
interests
with those of our shareholders. We intend to achieve these objectives by granting awards designed to provide our executive officers
with a meaningful proprietary interest in our growth and performance.
EXECUTIVE COMPENSATION
One of the fundamental
philosophies of our compensation program is that all of our full-time employees are eligible for grants of long-term equity incentive
awards. We believe that granting long-term equity incentives to virtually all full-time employees is somewhat unusual in our industry,
although it has become more prevalent in recent years in order to attract and retain employees at various levels. The Compensation
Committee believes that long-term equity incentive awards give employees a direct interest in our financial results and the performance
of the Company, furthering our goal of aligning the interests of each employee with those of our shareholders.
Determining the Amount of Long-Term
Equity-Based Incentive Compensation
The total dollar amount
of long-term incentives to be awarded to each executive is generally based on the amount that results in total direct compensation
between the 50th and 75th percentiles of executives in comparable positions in our compensation peer group. The Compensation Committee
considers recommendations of our CEO for adjustments to the amount of long-term incentives for executives other than himself and
compensation data of our compensation peer group provided by the independent compensation consultant and ultimately determines
the amount of long-term incentives to be awarded to each executive in its discretion. While long-term incentives are considered
primarily forward-looking, the Company’s and executive’s performance in the prior year may be considered in determining
the size of the awards.
Allocating Amount of
Long-Term Equity-Based Incentive
Compensation Among Award
Types
In 2014 and 2015, our long-term
equity-based incentive awards for executives consisted of 75% RSUs and 25% performance shares. In the Compensation
Committee’s opinion,
awards of RSUs provide an effective retention incentive and therefore, long-term incentive compensation has historically been
weighted more towards RSUs than other types of awards. Through consultation with Longnecker, the Compensation Committee determined
that in 2016, our long-term equity-based incentive compensation for executives would consist of 65% RSUs, 25% SARs to be settled
in cash (“Cash SARs”) and 10% performance shares.
We believe RSUs, Cash SARs
and performance shares align the interests of our executive officers with the interests of our shareholders on a long-term basis,
and for RSUs and performance shares, encourages retention and stock ownership in the Company. See also “Corporate Governance
and Board Matters—Our Corporate Governance Practices—Minimum Stock Ownership Guidelines.”
We believe this combination
of long-term equity awards provides incentives that capture absolute total return performance of our Common Stock as well as awards
that also capture variable performance relative to the performance of other oil and gas companies and consistent with combinations
of long-term equity awards used by other companies in our compensation peer group. The Compensation Committee may, in its discretion,
determine in the future to grant additional long-term equity incentive awards or award types, or to change the mix of award types,
as it deems appropriate at the time of such awards.
2016 Grants of Long-Term
Equity-Based Incentives
On March 14, 2016, the
Compensation Committee approved the following grants of long-term equity-based incentives to each Named Executive Officer with
the number of awards granted determined by dividing the allocated amount of long-term incentive compensation by the grant date
fair value per unit described below:
|
|
2016
Long-Term Equity-Based Incentives
|
|
|
RSUs
|
|
Cash
SARs
|
|
Performance
Shares
|
|
Name
|
#
|
$
|
|
#
|
$
|
|
#
|
$
|
|
S.P.
Johnson IV
|
85,671
|
$27.30
|
|
91,014
|
$9.88
|
|
10,074
|
$35.71
|
|
Brad Fisher
|
54,981
|
$27.30
|
|
58,410
|
$9.88
|
|
6,465
|
$35.71
|
|
David L. Pitts
|
28,086
|
$27.30
|
|
29,838
|
$9.88
|
|
3,303
|
$35.71
|
|
Gerald A. Morton
|
31,080
|
$27.30
|
|
33,016
|
$9.88
|
|
3,655
|
$35.71
|
|
Richard
H. Smith
|
21,222
|
$27.30
|
|
22,544
|
$9.88
|
|
2,496
|
$35.71
|
All 2016 long-term equity-based
incentives awarded to executives include a performance condition allowing the Company to avail itself of the benefits of Section
162(m) of the Code, which is described below under “—Tax Considerations of Executive Compensation—Section 162(m)
of the Internal Revenue Code.” The performance condition established by the Compensation Committee for the 2016 awards was
average daily
production of the Company for the
quarter ended June 30, 2016 of at least (a) 20,230 barrels of oil per day (“Bbls/d”), if the Company’s
average realized crude oil price was greater than or equal to $30 per Bbl, or (b) 16,184 Bbls/d, if the Company’s
average realized crude oil price was less than $30 per Bbl for such quarter, in each case excluding the impacts of derivative
settlements on the average realized prices and impacts of oil and gas
EXECUTIVE COMPENSATION
property acquisitions
and divestitures on daily production (the “2016 Production Target”). On July 27, 2016, the Compensation Committee
certified that the 2016 Production Target was met as average daily production for the quarter ended June 30, 2016 was 23,942
Bbls/d. Because the 2016 Production Target was met, the RSUs, Cash SARs and performance shares will vest as described below,
subject to continued employment and, for performance shares, subject to the market condition described below.
RSUs
The RSUs were granted
under the Company’s Prior Incentive Plan with a grant date fair value per RSU of $27.30, the average of the high and
low price of the Company’s common stock on the March 14, 2016 grant date. The RSUs vest ratably over a three-year
period, one-third of which vested on March 17, 2017, and an additional one-third will vest on March 17, 2018 and March 17,
2019.
Cash SARs
The Cash SARs were granted
under the Company’s Cash SAR Plan at an exercise price of $27.30 with a grant date fair value per Cash SAR of $9.88, based
on a Black- Scholes-Merton option pricing model calculated as of the March 14, 2016 grant date. The Cash SARs vest ratably over
a two year period, one-half of which vested and became exercisable on March 17, 2017 and the remaining one- half will vest on
March 17, 2018 and all of them expire March 17, 2021.
Performance Shares
The performance
shares were granted under the Company’s Prior Incentive Plan with a grant date fair value per performance share of
$35.71, based on a Monte Carlo simulation model calculated as of the March 14, 2016 grant date. The performance shares cliff
vest on March 17, 2019, with the actual number of performance shares to vest ranging from zero to 200% of target based on the
Company’s total shareholder return (“TSR”) relative to our 2016 stock performance peer group over a
three-year performance period.
Linear interpolation is
used to determine the payout multiplier for relative TSR that falls between the percentiles listed above.
For 2014, the Company utilized
a single peer group to benchmark executive compensation and determine relative TSR for performance shares. Beginning in 2015,
Longnecker and management recommended, and the Compensation Committee approved, the use of two different peer groups: a compensation
peer group, used to benchmark executive compensation, consisting of companies with appropriately-sized metrics such as oil and
gas revenue, assets and market capitalization, and a stock performance peer group, used for purposes of determining the relative
TSR for the performance shares, consisting of companies that do not necessarily fit within the same sized metrics used to develop
the compensation peer group but enabling the Company to compare itself with companies with similar operations in our established
core areas such as the Eagle Ford. The Compensation Committee reviews and approves the stock performance peer group each year.
The 18 companies that comprise the stock performance
peer group for performance shares granted in 2016 and the 17 companies that comprise the stock performance peer group for performance
shares granted in 2015 are presented in the table below:
|
|
|
|
|
|
2015
|
2016
|
|
|
Stock
|
Stock
|
|
|
Performance
|
Performance
|
|
|
Peer Group
|
Peer Group
|
|
Antero Resources Corporation
|
X
|
X
|
|
Bill Barrett Corporation
|
X
|
X
|
|
Bonanza Creek Energy, Inc.
|
X
|
X
|
|
Chesapeake Energy Corporation
|
X
|
X
|
|
Devon Energy Corporation
|
X
|
X
|
|
EOG Resources, Inc.
|
X
|
X
|
|
EP Energy Corporation
|
X
|
X
|
|
Gulfport Energy Corporation
|
X
|
X
|
|
Laredo Petroleum, Inc.
|
X
|
X
|
|
Marathon Oil Corporation
|
X
|
X
|
|
Noble Energy, Inc.
|
X
|
X
|
|
Northern Oil and Gas, Inc.
|
X
|
|
|
Oasis Petroleum Inc.
|
X
|
X
|
|
PDC Energy, Inc.
|
X
|
X
|
|
Range Resources Corporation
|
|
X
|
|
Rice Energy Inc.
|
|
X
|
|
Rosetta Resources Inc.
(1)
|
X
|
|
|
Sanchez Energy Corporation
|
X
|
X
|
EXECUTIVE COMPENSATION
|
|
2015
|
2016
|
|
|
Stock
|
Stock
|
|
|
Performance
|
Performance
|
|
|
Peer Group
|
Peer Group
|
|
SM Energy Corporation
|
|
X
|
|
Whiting Petroleum Corp.
|
X
|
X
|
(1) Effective
July 20, 2015, Rosetta Resources, Inc. was acquired by Noble Energy, Inc.
Severance
and Change of Control Benefits
As described in more detail
under “Executive Compensation—Employment Agreements” and “Executive Compensation—Potential Payments
to the Named Executive Officers Upon Termination or Change of Control,” we have entered into employment agreements with
the named executive officers that provide for specified severance pay and benefits upon certain termination events, including
termination events after a change of control. The employment agreements contain pay and benefits provisions that we believe are
comparable
to similar provisions employed
by a majority of the companies in our 2016 Compensation Peer Group. The Compensation Committee believes these agreements encourage
executives to remain in our employment, including in the event of a change of control of the Company and during circumstances
which indicate that a change of control may occur. The Compensation Committee believes this program is important in maintaining
strong leadership and in encouraging retention in these situations.
Perquisites
and Other Benefits
We pay premiums for supplemental
life insurance for the named executive officers and make matching 401(k) contributions for the named executive officers and all
of our other employees. We believe providing these
benefits as part of our
overall compensation package is necessary to attract and retain highly qualified executives and that these benefits are comparable
to those provided by our 2016 Compensation Peer Group.
Clawback
Provisions
Other than legal requirements
under the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”), the Board of Directors has not adopted a formal clawback
policy to recoup incentive based compensation in the event of a financial statement restatement. Section 304 of Sarbanes-Oxley
mandates that the CEO and CFO reimburse the Company for any bonus or other incentive-based or equity-based compensation they received
and any profits from the sale
of securities they realized
in a year following the issuance of financial statements that are later required to be restated as a result of misconduct. The
Board of Directors has reaffirmed that the Company will adopt a clawback policy as required by Section 954 of the Dodd-Frank Wall
Street Reform and Consumer Protection Act of 2010 if and when final regulations have been adopted by the SEC and NASDAQ.
Tax
Considerations of Executive Compensation
Section
162(m) of the Internal Revenue Code
Section 162(m) of the Code
places a limit of $1,000,000 on the amount of compensation that we may deduct in any one year with respect to compensation paid
to each of our Named Executive Officers other than the CFO. There is an exception to the $1,000,000 limitation for performance-based
compensation meeting certain requirements. Annual incentive bonuses subject to performance metrics, long-term RSUs subject to
a production performance goal, SARs and performance shares generally are performance-based compensation meeting those requirements
and, as such, should be fully
deductible by us. Non-performance
based compensation would include base salaries and the IRS value of any perquisites. To maintain flexibility in compensating our
executive officers in a manner designed to promote varying corporate goals, the Compensation Committee has not adopted a policy
requiring all compensation to be tax deductible. As noted above, the Compensation Committee took Section 162(m) into account in
connection with the 2016 awards of equity-based compensation and the 2016 payout of the 2015 annual incentive bonuses subject
to performance metrics.
EXECUTIVE COMPENSATION
Section
409A of the Internal Revenue Code
To the extent one or more
elements of compensation provided to employees is subject to Section 409A of the Code, the Company intends that these elements
be compliant so that the employees are not subject to income inclusion at vesting and the additional income taxes imposed by Section
409A. Section 409A requires that “deferred compensation” either comply with certain deferral election, payment timing,
and other rules or be subject to a 20% additional income tax and interest at a premium rate imposed on the person who is to receive
the deferred compensation. The Company believes that if the adverse tax consequences of Section 409A become applicable to the
Company’s
compensation arrangements
such arrangements would be less efficient and less effective in incentivizing and retaining employees. The Company intends to
operate its compensation arrangements so that they are compliant with or exempt from Section 409A and therefore, in 2008, amended
or modified its compensation programs and awards, including the employment agreements to the extent necessary to make them compliant
or exempt. The employment agreements of the named executive officers provide that the Company will provide additional payments
in the event that an additional tax is imposed under Section 409A.
PROPOSAL 5. APPROVAL OF THE 2017
INCENTIVE PLAN OF CARRIZO OIL & GAS, INC.
The Board has unanimously approved the 2017 Incentive Plan to replace
the Prior Incentive Plan, subject to shareholder approval at the Annual Meeting, and recommends that the Company’s shareholders
approve and adopt the 2017 Incentive Plan. We intend to reserve 2,675,000 shares for issuance pursuant to awards under the 2017
Incentive Plan, which is in addition to approximately 26,275 shares (as of March 31, 2017) which remain available for grant pursuant
to the Prior Incentive Plan assuming all future grants will be full value stock awards. If our shareholders approve the 2017 Incentive
Plan, shares that would otherwise become available for issuance under the Prior Incentive Plan as a result of forfeitures, expiration
or cancellation of previously made awards will become available for issuance under the 2017 Incentive Plan, and no additional grants
will be made pursuant to the Prior Incentive Plan.
The 2017 Incentive Plan is intended to replace the Prior Incentive
Plan and is needed to continue our equity compensation program. As of December 31, 2016, there were 858,982 shares of common stock
remaining available for grant under the Prior Incentive Plan assuming all future grants will be full value stock awards. Any previously
granted awards that are outstanding under the Prior Incentive Plan will remain outstanding in accordance with their terms. As of
March 31, 2017, an aggregate of 1,432,983 shares are subject to unvested restricted stock awards, RSUs, and performance shares.
As of March 31, 2017, the Company has outstanding Cash SARs covering 965,078 shares. See also “Executive Compensation—
Equity Compensation Plans Information” for additional information concerning our equity compensation plans.
If the 2017 Incentive Plan is not approved by the shareholders,
we will not be able to continue our equity- based long-term incentive program, and we may be required to increase significantly
the cash component of our executive compensation program in order to remain competitive and adequately compensate our employees.
The Company considers the 2017 Incentive Plan an essential element
of total compensation and believes the 2017 Incentive Plan promotes its interests and the interests of its shareholders by:
|
|
●
|
attracting and retaining the services of key employees,
qualified directors and qualified independent contractors; and
|
|
|
●
|
encouraging the sense of proprietorship in and stimulating
the active interest of those persons in the development and financial success of the Company by making awards designed to provide
participants in the 2017 Incentive Plan with proprietary interest in the growth and performance of the Company.
|
Shareholder approval of the 2017 Incentive Plan will also constitute
approval for purposes of satisfying the shareholder approval requirements (a) under Section 162(m) of the Code, and the rules and
regulations thereunder so that the Compensation Committee has the discretion to grant awards in the future under the 2017 Incentive
Plan that meet the requirements of “performance-based compensation” exempt from the deduction limitations thereunder
and (b) under Section 422 of the Code so that the Compensation Committee may grant incentive stock options, or ISOs.
PROPOSAL 5. APPROVAL OF THE 2017 INCENTIVE PLAN
|
Best Practices
|
|
☑
|
Independent Oversight.
The Compensation Committee of our Board of Directors, composed solely of independent directors, will approve all grants made under the 2017 Incentive Plan; provided, however, that the Compensation Committee may delegate to any committee of the Board, to the Chief Executive Officer and to any of our other senior officers its duties under the 2017 Incentive Plan pursuant to such conditions or limitations as the Committee may establish; provided, however, that such delegation will not extend to the authority to make awards to participant who are subject to Section 16 of the Exchange Act. As with the Prior Incentive Plan, the Compensation Committee has delegated to the special stock award committee of our Board of Directors, which committee consists solely of Mr. Johnson in his capacity as a director, the authority to grant awards with respect to a maximum of 15,000 shares per quarterly calendar period to non-executive employees. See “Committees of the Board of Directors” for information regarding the special stock award committee.
|
|
☑
|
No Repricing of Options or SARs.
The 2017 Incentive Plan prohibits repricing, replacement and regranting of stock options or SARs at lower prices unless approved by our shareholders.
|
|
☑
|
No Discounted Options or SARs.
Stock options and SARs may not be granted with an exercise price below the closing price of our common stock on the date of grant.
|
|
☑
|
No Dividends on Options or SARs.
Dividends and dividend equivalents may not be paid or accrued on stock options or SARs.
|
|
☑
|
Limited Terms for Options and SARs.
Stock options
and SARs granted under the 2017 Incentive Plan are limited to 10-year terms.
|
|
☑
|
No Liberal Share Counting.
Shares that are tendered by a participant or withheld (1) as full or partial payment of withholding taxes related to the exercise or settlement of options, or (2) as payment for the option price, and shares repurchased in the open market with the proceeds of the payment of the option price will not become available again for awards under the 2017 Incentive Plan.
|
|
☑
|
No Dividends or Dividend Equivalents on Unvested Awards.
Any dividends or dividend equivalents will only be paid if the underlying shares vest pursuant to the terms of the award.
|
|
☑
|
Annual Limitation on Director Awards and Compensation.
The aggregate grant value of awards and cash compensation paid to any individual non-employee director may not exceed $1,000,000 in any calendar year.
|
|
☑
|
Awards may be subject to future clawback or recoupment.
All awards granted under the 2017 Incentive Plan will be subject to any clawback policy required by applicable law.
|
|
☑
|
No Transferability.
Awards generally may not be transferred, except by will or the laws of descent and distribution or pursuant to a qualified domestic relations order, unless otherwise provided in the applicable award agreement.
|
|
☑
|
No “Evergreen” Provision.
Shares authorized for issuance under the 2017 Incentive Plan will not be replenished automatically. Any additional shares to be issued over and above the amount for which we are seeking authorization must be approved by our shareholders.
|
|
☑
|
No Automatic Grants.
There are no automatic grants to new participants or “reload” grants when outstanding awards are exercised, expire or are forfeited.
|
|
☑
|
No Tax Gross-ups.
Participants do not receive tax gross-ups under the 2017 Incentive Plan. As discussed in the Compensation Discussion and Analysis section, no tax gross-ups have been provided in any employment agreements since May 2011.
|
Section
162(m)
Section 162(m) of the Code places a limit of $1,000,000 on the
amount of compensation that we may deduct in any one year with respect to compensation paid to each of our Named Executive Officers
other than the CFO. There is an exception to the $1,000,000 limitation for performance-based compensation meeting certain requirements.
The Section 162(m) regulations generally require that shareholders approve the material terms of the performance goals, and that
performance goals be
submitted for reapproval no later than five years after initial
shareholder approval. The performance goals include the class of employees eligible to receive awards, the business criteria on
which the award is based, and the maximum amount of compensation that could be paid to an employee under the plan, and are set
forth under the captions “—Eligibility”, “—Performance Awards”, and “—Award Limits”
below.
PROPOSAL 5. APPROVAL OF THE 2017 INCENTIVE PLAN
Summary
of the 2017 Incentive Plan
A description of the 2017 Incentive Plan appears below. Because
the description of the 2017 Incentive Plan in this proxy statement is a summary, it may not contain all the information that may
be important to you. The summary is qualified by reference to the 2017 Incentive
Plan. You should carefully read the entire copy of the 2017 Incentive
Plan. A copy of the full text of the 2017 Incentive Plan is attached hereto as Appendix A to this proxy statement.
Eligibility
Persons eligible for Awards (as defined in the 2017 Incentive Plan)
are (i) all employees of the Company, (ii) non-employee directors and (iii) certain independent
contractors. As of March 31, 2017, approximately 237 employees
and non-employee directors would be eligible for grants of Awards under the 2017 Incentive Plan.
Shares
Available for Awards
The 2017 Incentive Plan provides that up to 2,675,000 shares of
Common Stock, plus the shares remaining available for awards under the Prior Incentive Plan, may be issued, all of which may be
issued as incentive stock options under Section 422 of the Code. The 2017 Incentive Plan provides that each full value stock award
(e.g. restricted stock, RSUs and performance shares) count as 1.35 shares of Common Stock and each Option and stock-settled SAR
count as one share of Common Stock.
The number of shares of Common Stock that are the subject of Awards
under the 2017 Incentive Plan or the Prior Incentive Plan that are forfeited or terminated, expire unexercised, are settled in
cash in lieu of Common Stock or are exchanged for Awards that do not involve
Common Stock immediately become available for additional Awards
under the 2017 Incentive Plan and the share limit under the 2017 Incentive Plan shall be increased by the same amount as such shares
were counted against the share limit (under the 2017 Incentive Plan or Prior Incentive Plan, as applicable). However, the number
of shares reserved for issuance under the 2017 Incentive Plan is not increased by (i) shares of Common Stock not issued or delivered
as a result of the net settlement of stock-settled SARs or stock option, (ii) shares of Common Stock used to pay the exercise price
or withholding taxes related to an outstanding Award, or (iii) shares of Common Stock repurchased on the open market with the proceeds
of the option exercise price.
Administration
The Compensation Committee administers the 2017 Incentive Plan
with respect to Awards to non-employee directors, employees and independent contractors and has broad power to take actions thereunder,
to interpret the 2017 Incentive Plan and to adopt rules, regulations and guidelines for carrying out its purposes. The Compensation
Committee may, in its discretion, among other things, extend or accelerate the exercisability of, accelerate the vesting of or
eliminate or make less restrictive any restrictions contained in any Award, waive any restrictions or other provision of the 2017
Incentive Plan or in any Award or otherwise amend or modify any Award in any manner that is either (a) not adverse to that participant
holding the Award or (b) consented to by that participant. However, except in connection with a transaction involving the Company
or its capitalization, the terms of outstanding awards may not be amended without approval of the shareholders of the Company to
(i) reduce the exercise price of outstanding options
or SARs, (ii) cancel, exchange, substitute, buyout or surrender
outstanding options or SARs in exchange for cash or other Awards, (iii) take any other action with respect to a stock option or
SAR that would be treated as a repricing under the rules and regulations of the principal national securities exchange on which
the shares of Common Stock are listed or (iv) permit the grant of any stock options or SARs that contain a so-called “reload”
feature under which additional stock options, SARs or other Awards are granted automatically to the participant upon exercise of
the original stock option or SAR.
The Compensation Committee also may delegate to the chief executive
officer, other senior officers of the Company or to other committees of the Board its duties under the 2017 Incentive Plan to the
extent allowed by applicable law. See “Committees of the Board of Directors” for information regarding the special
stock award committee.
PROPOSAL 5. APPROVAL OF THE
2017 INCENTIVE PLAN
The Compensation Committee will determine the employees and independent
contractors to receive Awards and the terms, conditions and limitations applicable to each such Award, which conditions may, but
need not, include continuous service with the Company, achievement
of specific business objectives, attainment of specified growth rates, increases in specified indices or other comparable measures
of performance.
Amendment;
Termination
The Board of Directors may amend, modify, suspend or terminate
the 2017 Incentive Plan for the purpose of addressing any changes in legal requirements or for any other lawful purpose, except
that no amendment that would adversely affect the rights of any participant under any Award previously granted to such participant
may be made without the consent of such participant and no amendment will be effective prior to its approval
by the shareholders of the Company to the extent such approval
is then required pursuant to Rule 16b-3 in order to preserve the applicability of any exemption provided by such rule to any Award
then outstanding (unless the holder of such Award consents) or to the extent shareholder approval is otherwise required by applicable
law.
Adjustment
The Board of Directors may make certain adjustments,
including changes to the shares subject to outstanding Awards, shares available for grant under the 2017 Incentive Plan, and
the annual limits on Awards, in the event of any subdivision, split or consolidation of outstanding shares of Common Stock,
any declaration of a stock dividend payable in shares of Common Stock,
any recapitalization or capital reorganization of the Company,
any consolidation or merger of the Company with another corporation or entity, any adoption by the Company of any plan of exchange
affecting the Common Stock or any distribution to holders of Common Stock of securities or property (other than normal cash dividends).
Clawback
Awards under the 2017 Incentive Plan will be subject to the provisions
of any clawback policy required by applicable law or implemented by the Company, which
clawback policy may provide for forfeiture, repurchase and/or
recoupment of Awards and amounts paid or payable pursuant to or with respect to Awards.
Awards
At the discretion of the Compensation Committee or the special
stock award committee, as applicable, employees, consultants or non-employee directors may be granted Awards under the 2017 Incentive
Plan in the
form of stock options, SARs, stock awards, cash awards or performance
awards. Such Awards may be granted singly, in combination, or in tandem.
Options
Awards may be in the form of rights to purchase a specified number
of shares of Common Stock at a specified price not less than that of the fair market value of a share of Common Stock on the date
of grant (“Options”). An Option may be either an incentive stock option (“ISO”) that is intended to comply,
or a nonqualified stock option (“NSO”) that is not intended to comply, with the requirements of Section 422 of the
Code; provided that independent contractors and directors cannot be awarded ISOs. The Compensation Committee
will determine the participants to receive Options and the terms,
conditions and limitations applicable to each such Option. The term of each Option may not be longer than ten years from the date
of grant; provided, however, if the term of a NSO expires when trading in the Common Stock is prohibited by applicable law or at
a time in which there is a blackout period or restriction period under the Company’s insider trading policy or practices
(as then in effect), then the term of such NSO shall expire on the 30th day after the expiration of such prohibition.
PROPOSAL
5. APPROVAL OF THE 2017 INCENTIVE PLAN
Stock Appreciation
Rights
Awards may also be in the form of SARs, which are rights to receive
a payment, in cash or Common Stock, equal to the fair market value or other specified value of a number of shares of Common Stock
on the rights exercise date over a specified strike price not less than the fair market value of a share of Common Stock on the
date of grant. The term of each SAR may not be longer than ten years
from the date of grant; provided, however, if the term of a SAR
expires when trading in the Common Stock is prohibited by applicable law or at a time in which there is a blackout period or restriction
period under the Company’s insider trading policy or practices (as then in effect), then the term of such SAR shall expire
on the 30th day after the expiration of such prohibition.
Stock Awards
Awards may also be in the form of grants of Common Stock or units
denominated in Common Stock, including restricted stock and RSUs (“Stock Awards”). The terms, conditions and limitations
applicable to any Stock Award will be determined by the Compensation Committee. At
the discretion of the Compensation Committee, the terms of a
Stock Award may include rights to receive dividends or dividend equivalents, which will only be paid if the underlying shares vest
pursuant to the terms of the Stock Award.
The table below summarizes restricted stock, RSU, and performance
share award activity under the Prior Incentive Plan for the period from January 1, 2017 through March 31, 2017. There were no other
share-based awards granted during this period.
|
|
|
Weighted-Average
|
|
|
|
Grant Date
|
|
|
Share/Units
|
Fair Value
|
|
Unvested restricted stock awards and units as
of January 1, 2017
|
1,266,220
|
$39.55
|
|
Granted
|
796,183
|
$27.54
|
|
Vested
|
661,345
|
$43.48
|
|
Forfeited
|
3,933
|
$29.42
|
|
Unvested restricted stock awards and units as
of March 31, 2017
|
1,432,983
|
$31.81
|
Cash Awards
Awards may also be in the form of grants denominated in cash.
The terms, conditions and limitations applicable to
any cash awards granted pursuant to the 2017 Incentive Plan
will be determined by the Compensation Committee.
Performance
Awards
At the discretion of the Compensation Committee, any of the above-described
Awards may be made in the form of a performance award. A performance award is an award that is subject to the attainment of one
or more performance goals. Performance goals need not be based upon an increase or positive result under a particular business
criterion and could include, for example, maintaining the status quo or limiting economic losses. The terms, conditions and limitations
applicable to any performance award will be determined by the Compensation Committee.
The 2017 Incentive Plan permits, but does not require, the Compensation
Committee to structure any performance award made to a named executive
officer as performance-based compensation. At the discretion
of the Compensation Committee, certain Awards under the 2017 Incentive Plan will be intended to qualify as performance-based compensation
under Section 162(m) of the Code. Section 162(m) of the Code generally limits the deductibility for federal income tax purposes
of annual compensation paid to a company’s executive officers to $1,000,000 per covered executive in a taxable year. The
Compensation Committee and the Board of Directors may take deductibility and nondeductibility of compensation into account but
have in the past authorized, and retain in the future the discretion to authorize, the payment of potentially nondeductible amounts.
PROPOSAL 5. APPROVAL OF THE
2017 INCENTIVE PLAN
The particular performance-based objectives that may be imposed
in connection with a performance award that qualifies as performance-based compensation under Section 162(m) of the Code are:
|
|
●
|
revenue and income measures (which include revenues,
revenues including the net cash impact of derivative settlements (“Adjusted Revenues”), gross margin, operating income,
earnings before or after the effect of certain items such as interest, income taxes, depreciation, depletion and amortization,
and non-cash or non-recurring items of income or expense (“Adjusted EBITDA”), net income before the effect of certain
non-cash or non-recurring items of income or expense (“Adjusted Net Income”), net income and related per share amounts);
|
|
|
●
|
expense measures (which include operating expense, general
and administrative expense and depreciation, depletion and amortization expense);
|
|
|
●
|
operating measures (which include production volumes,
margin, drilling, completion, leasehold or seismic capital expenditures, results of drilling and completion activities and the
number of wells drilled, brought on production and/or producing);
|
|
|
●
|
reserve measures (which include developed, undeveloped
and total reserves, reserve replacement ratios, extensions and discoveries, revisions of previous estimates, PV-10 values, finding
and development costs and other reserve measures);
|
|
|
●
|
cash flow measures (which include net cash flows from
operating activities, discretionary cash flows from operating activities and working capital);
|
|
|
●
|
liquidity measures (which include Adjusted EBITDA, net
debt to Adjusted EBITDA, working capital and the credit facility borrowing base);
|
|
|
●
|
leverage measures (which include debt-to-equity ratio,
debt-to-total capitalization ratio, and net debt);
|
|
|
●
|
market measures (which include stock price, total shareholder
return and market capitalization measures);
|
|
|
●
|
return measures (which include return on equity, return
on assets and return on invested capital);
|
|
|
●
|
corporate value measures (which include compliance, safety,
environmental and personnel matters); and
|
|
|
●
|
measures relating to acquisitions or dispositions.
|
Performance awards may include one or more performance goals,
either individually or in any combination, and may be based on one or more business criteria applicable to the grantee, the Company
as a whole or one or more of the Company’s business units, subsidiaries, business segments, divisions, geographic regions
and measured either annually or over a period of years, on an absolute basis or relative to a pre- established target, to results
over a previous period or to a designated peer group, in each case as specified by the Compensation Committee in the Award.
The Compensation Committee may provide in any performance award
that any evaluation of performance may include or exclude any of the following events that occurs during a performance period:
(i) asset impairments, (ii) litigation or claim judgments or settlements, (iii) the effect of changes in tax laws, accounting principles,
or other laws or provisions affecting reported results, (iv) any reorganization and restructuring programs, (v) unusual, infrequently
occurring, nonrecurring or one-time events affecting the Company or its financial statements as described in management’s
discussion and analysis of financial condition and results of operations appearing in the Company’s annual report to shareholders,
Form 10-K or Form 10-Q for the applicable period, (vi) acquisitions or divestitures, (vii) foreign exchange gains and losses, (viii)
derivative settlements or (ix) such other objective adjustments as may be provided for connection with the establishment of the
performance goal. The amount of cash or shares payable or vested pursuant to performance awards that are intended to satisfy the
requirements of performance-based compensation under Section 162(m) of the Code may not be adjusted upward; provided, however,
that the Compensation Committee may retain the discretion to adjust the amount of cash or shares payable or vested pursuant to
such performance awards downward either on a formula or discretionary basis or any combination, as determined by the Compensation
Committee.
The performance targets used by the Company in 2016 are
described in “Compensation Discussion and Analysis—Executive Compensation Components—Long-Term Incentive
Awards.”
Award Limits
To preserve the Company’s ability to deduct the compensation
associated with grants and Awards made under the 2017 Incentive Plan, the plan provides that grants or Awards in the form of Options
or SARs made to
an individual employee in any calendar year cannot cover an aggregate
of more than 375,000 shares of Common Stock, and no participant may be granted Stock Awards relating to more than 375,000 shares
of Common Stock in
PROPOSAL 5. APPROVAL OF THE
2017 INCENTIVE PLAN
any calendar year. In addition, the maximum cash award made to
any participant in respect of any calendar year may not exceed $5,000,000.
No non-employee director may be granted during any calendar year
Awards (in his or her capacity as a director) having a fair value determined on the date of grant when added to all cash compensation
paid to the non- employee director during the same calendar year in excess of $1,000,000.
In general, each Award is only subject to a single limitation.
However, a participant may be granted Awards in combination such that portions of the Award are subject to differing limitations,
in which event each portion of the combination Award is subject only to a single appropriate limitation. For example, if a participant
is granted an Award that is in part a Stock Award and in part a cash award, then the Stock Award shall be subject only to the limitation
relating to Stock Awards and the cash award shall be subject only to the limitation relating to cash awards.
U.S. Federal Income Tax Consequences
The following is a summary of the general rules of current
U.S. Federal income tax law relating to the tax treatment of award that may be issued under the 2017 Incentive Plan. The
discussion is general in nature and does not take into account a number of considerations which may apply in light of the
particular circumstances
of a participant. This summary is not complete and does not attempt
to describe any tax consequences arising in the context of the participant’s death or the income tax laws of any local, state
or foreign country in which the participant’s income or gain may be taxable.
Stock Awards
Restricted Stock.
A participant
generally recognizes no taxable income at the time of an award of restricted stock. A participant may, however, make an election
under Section 83(b) of the Code to have the grant taxed as compensation income at the date of receipt, with the result that any
future appreciation or depreciation in the value of the shares of stock granted may be taxed as capital gain or loss on a subsequent
sale of the shares. If the participant does not make a Section 83(b) election, the grant will be taxed as compensation income
at the full fair market value on the date the restrictions imposed on the shares expire. Unless a participant makes a Section
83(b) election, any dividends paid to the participant on the shares of restricted stock will generally be compensation income
to the participant and deductible
by us as compensation expense. In general, we will receive a
deduction for U.S. Federal income tax purposes for any compensation income taxed to the participant. To the extent a participant
realizes capital gains, as described above, we will not be entitled to any deduction for federal income tax purposes.
Restricted Stock Units.
A participant
who is granted RSUs will recognize no income upon grant of the RSUs. At the time the underlying shares of common stock (or cash
in lieu thereof) are delivered to a participant, the participant will recognize compensation income equal to the full fair market
value of the shares received. We will generally be entitled to a deduction for U.S. Federal income tax purposes the corresponds
to the compensation income recognized by the participant.
Options; Stock
Appreciation Rights
Options granted under the 2017 Incentive Plan may
constitute ISOs within the meaning of Section 422 of the Code, while other options granted under the 2017 Incentive Plan may
constitute NSOs. Grants of Options to non-employee directors and independent contractors are NSOs. The Code provides for tax
treatment of Options qualifying as ISOs that may be more favorable to participants than the tax treatment accorded NSOs.
Generally, upon the exercise of an ISO, the optionee will recognize no taxable income for U.S. Federal income tax purposes,
although the difference between the exercise price of the ISO and the fair market value of the stock at the date of exercise
is an addition to income in determining alternative minimum taxable income and
such amount may be sufficient in amount to subject the optionee
to the alternative minimum tax. On the sale of shares acquired by exercise of an ISO (assuming that the sale does not occur within
two years of the grant date or within one year of the exercise date), any gain will be taxed to the optionee as long-term capital
gain. Except with respect to death or disability, an optionee has three months after termination of employment in which to exercise
an ISO and retain favorable tax treatment at exercise. No deduction is available to the Company upon the grant or exercise of an
ISO (although a deduction may be available if the participant disposes of the shares so purchased before the applicable holding
periods expire).
PROPOSAL 5. APPROVAL OF THE
2017 INCENTIVE PLAN
In contrast, upon the exercise of an NSO, the optionee recognizes
ordinary taxable income on the exercise date in an amount equal to the excess of the fair market value of the shares purchased
over the exercise price. Upon the sale of such shares by the optionee, any difference between the fair market value at the date
of sale and the fair market value at the date of exercise will be treated generally as capital gain or loss. Subject to the limitations
discussed below, upon exercise of an NSO, the Company is entitled to a tax deduction in an amount equal to the ordinary taxable
income recognized by the participant.
Participants do not recognize taxable income upon the grant of
a SAR. Upon the exercise of a SAR, the participant will recognize ordinary income in an amount equal to the cash or fair market
value of the shares of stock received at the date of exercise of the SAR. The participant’s tax basis in any shares of Common
Stock received on the exercise of a SAR will generally equal the fair market value of such shares on the date of exercise. Subject
to the limitations discussed below, the Company will be entitled to a deduction for U.S. Federal income tax purposes that corresponds
as to timing and amount with the taxable income recognized by the participant under the foregoing rules.
Deductibility;
Excise Taxes
In general, a U.S. Federal income tax deduction is allowed
to the Company in an amount equal to the ordinary taxable income recognized by a participant with respect to Awards granted
under the 2017 Incentive Plan, provided that such amount constitutes an ordinary and necessary business expense of the
Company, that such amount is reasonable and that the Company satisfies any withholding obligations with respect to the
participant’s ordinary taxable income. As discussed above, Section 162(m) of the Code may limit the Company’s
ability to deduct compensation expense in excess of $1 million to any named executive officer, unless the excess amounts
satisfy the requirements for qualified performance- based compensation. The 2017 Incentive Plan permits the Compensation
Committee to structure grants and Awards made under the 2017 Incentive Plan to “covered employees” as
performance-based compensation that is exempt from the limitation of Section 162(m) of the Code. However, the Compensation
Committee may award compensation that is or may become non-deductible, and expects to consider whether it believes such
grants are in our interest, balancing tax efficiency with long- term strategic objectives.
Change in Control.
The acceleration
of the exercisability or the vesting of an award upon the occurrence of a change in control may result in an “excess parachute
payment” within the meaning of Section 280G of the Code. A “parachute payment” occurs when an employee
receives payments contingent upon a change in control that exceed
an amount equal to three times his or her “base amount.” The term “base amount” generally means the average
annual compensation paid to such employee during the five calendar years preceding calendar year in which the change in control
occurs. An “excess parachute payment” is the excess of all parachute payments made to the employee on account of a
change in control over the employee’s base amount. If any amount received by an employee is characterized as an excess parachute
payment, the employee is subject to a 20% excise tax on the amount of the excess, and the company is denied a tax deduction with
respect to such excess.
Code Section 409A.
Section 409A
of the Code generally provides that any deferred compensation arrangement must satisfy specific requirements, both in operation
and in form, regarding (i) the timing of payment, (ii) the advance election of deferrals, and (iii) restrictions on the acceleration
of payment. Failure to comply with Section 409A of the Code may result in the early taxation (plus interest) to the participant
of deferred compensation and the imposition of a 20% penalty on the participant on such deferred amounts included in the participant’s
taxable income. The Company intends to structure Awards under the 2017 Incentive Plan in a manner that is designed to be exempt
from or comply with Section 409A of the Code.
2017 Incentive Plan Future
Benefits
The allocation of some of the shares that would become available
for issuance under the 2017 Incentive Plan is not currently determinable as such allocation depends on future decisions to be
made by the Compensation Committee or the Board of Directors in their sole discretion, subject to applicable provisions of the
2017 Incentive Plan. No Awards have been granted that are
contingent on the approval of the 2017 Incentive Plan. Therefore,
it is not possible to determine the benefits that will be received in the future by participants in the 2017 Incentive Plan or
the benefits that would have been received by such participants if the 2017 Incentive Plan had been in effect in the year ended
December 31, 2016. Certain tables in this proxy statement set forth
PROPOSAL 5. APPROVAL OF THE
2017 INCENTIVE PLAN
information with respect to prior awards granted to our named
executive officers under the Prior Incentive Plan currently in effect.
In 2017, the Company currently expects to award each non-employee
director RSUs as described in more detail above under “Director Compensation.” Because future Awards are in the discretion
of the Board and Compensation Committee, the number of shares subject to future Awards could increase or decrease and the type
and terms of future Awards could change as well, all without the need for future shareholder approval.
The Board believes that the approval of the 2017 Incentive
Plan is in the best interest of the Company and its shareholders. The Board therefore recommends a vote for the 2017
Incentive Plan, and it is intended that the proxies not marked to the contrary will be so voted. Because approval of the 2017
Incentive Plan will increase the number of shares available for issuance to all directors and executive officers of the
Company, each of the directors and executive officers of the Company has an interest and may benefit from the approval of the
2017 Incentive Plan.
Board Recommendation and Vote
Requirement
The Board of
Directors recommends that shareholders vote “FOR” the approval of the 2017 Incentive Plan of Carrizo Oil & Gas,
Inc.
PROPOSAL
6. RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The
Audit Committee has appointed, and recommends the approval of the appointment of, KPMG LLP as independent registered public accounting
firm for the fiscal year ending December 31, 2017. KPMG LLP served as the Company’s independent registered public accounting
firm for the fiscal years ended December 31, 2016, 2015 and 2014. Representatives of KPMG LLP are expected to be present at the
Annual Meeting and will be given the opportunity to make a statement, if they desire to do so, and to respond to appropriate questions.
Unless
shareholders specify otherwise in the proxy, proxies solicited by the Board of Directors will be voted by the persons named in
the proxy at the Annual Meeting to ratify the selection of KPMG LLP as the Company’s independent registered public accounting
firm for 2017. Although the appointment of an independent registered public accounting firm is not required to be submitted to
a vote of shareholders, the Board of Directors recommended that the appointment be submitted to our shareholders for approval.
If our shareholders do not approve the appointment of KPMG LLP, the Board of Directors may consider the appointment of another
independent registered public accounting firm.
Board
Recommendation
The
Board of Directors recommends that shareholders vote “FOR” the ratification of the appointment of KPMG LLP as independent
registered public accounting firm for the Company for 2017.
PROPOSAL
6. RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Independent
Registered Public Accounting Firm’s Fees
The
following table sets forth the fees billed to us by KPMG LLP for professional services rendered in connection with the audit of
the Company’s annual financial statements included in the Company’s Annual Reports on Form 10-K for the years ended
December 31, 2016 and
2015,
and the review of the Company’s quarterly financial statements included in the Company’s Quarterly Reports on Form
10-Q for the quarters ended March 31, 2016 and 2015, June 30, 2016 and 2015 and September 30, 2016 and 2015.
|
Description
|
|
2016
|
|
|
2015
|
|
|
Audit Fees
(1)
|
|
|
$966,649
|
|
|
|
$1,068,403
|
|
|
Audit-Related Fees
|
|
|
—
|
|
|
|
—
|
|
|
Tax Fees
(2)
|
|
|
39,760
|
|
|
|
19,585
|
|
|
All
Other Fees
|
|
|
1,927
|
|
|
|
1,786
|
|
|
Total
|
|
|
$1,008,336
|
|
|
|
$1,089,774
|
|
|
|
(1)
|
Includes
$113,119 and $136,290 of fees associated with services rendered in connection with securities
offerings and related SEC filings during 2016 and 2015, respectively.
|
|
|
(2)
|
The
2016 and 2015 tax fees consist of tax consulting services provided in connection with
the preparation and review of the Company’s Section 382 ownership change analysis.
|
Audit
Committee Preapproval Policy
The
Audit Committee has adopted a policy that all audit, review or attest engagements and permissible non- audit services, including
the fees and terms thereof, to be performed by the independent registered public accounting firm (subject to, and in compliance
with, the
de minimis
exception for non-audit services described in Section 10A(i)(1)(B) of the Exchange Act and the applicable
rules and regulation of the SEC) will be
subject
to pre-approval of the Audit Committee. The Audit Committee has delegated authority to pre-approve permitted services to certain
members of management subject to the limitations set forth in the pre-approval policy. Such approval must be reported to the Audit
Committee at the next scheduled meeting. No non-audit services were performed by KPMG LLP pursuant to the
de minimis
exception
in 2016 and 2015.
PROPOSAL
6. RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Delivery
of One Proxy Statement and Annual Report to a Single Household to Reduce Duplicate Mailings
The SEC permits a single set of the annual report
and proxy statement to be sent to any household at which two or more shareholders reside if they appear to be members of the same
family. This procedure, referred to as householding, reduces the volume of duplicate information shareholders receive and reduces
mailing and printing expenses. A number of brokers and other nominees have instituted householding.
As a result, if you hold your shares through a
broker or other nominee and you reside at an address at which two or more shareholders reside, you will likely be
receiving only one set of the annual report and
proxy statement unless any shareholder at that address has given the broker or other nominee contrary instructions. However, if
any such beneficial shareholder residing at such an address wishes to receive a separate set of the annual report and proxy statement
in the future, that shareholder should contact their broker or other nominee. Shareholders of record should send a request to the
Company’s Corporate Secretary at the Company’s principal executive offices, 500 Dallas, Suite 2300, Houston, Texas
77002, telephone number (713) 328-1000.
OTHER ITEMS
Forward
Looking Statements
This proxy statement contains statements, including
in “Compensation Discussion and Analysis” concerning our intentions, expectations, projections, assessments of risks,
beliefs, plans or predictions and underlying assumptions and other statements that are not historical facts that are “forward-looking
statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking rely on assumptions
and involve risks and uncertainties, many of which are beyond our control, including, but not limited to, those relating to a worldwide
economic downturn, availability of financing, our dependence on our exploratory drilling activities, the volatility of and changes
in oil and gas prices, the need to replace reserves depleted by production, operating risks of oil and gas operations, our dependence
on our key personnel, and other factors
detailed herein and under Part I, “Item 1A.
Risk Factors” and in other sections of our most recent annual report on Form 10-K and in other filings with the SEC.
Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated. All subsequent
written and oral forward- looking statements attributable to us or persons acting on our behalf are expressly qualified in their
entirety by reference to these risks and uncertainties. You should not place undue reliance on our forward-looking statements.
Each forward-looking statement speaks only as of the date of the particular statement, and, except as required by law, we undertake
no duty to update or revise any forward-looking statement.
APPENDIX
A
2017
INCENTIVE PLAN OF
CARRIZO OIL & GAS, INC.
1.
Plan
.
This 2017 Incentive Plan of Carrizo Oil & Gas, Inc. (the “Plan”) was adopted by Carrizo Oil & Gas, Inc. to
reward certain corporate officers and key employees of Carrizo Oil & Gas, Inc. and certain independent contractors and directors
by enabling them to acquire shares of common stock of Carrizo Oil & Gas, Inc.
2.
Objectives
.
This Plan is designed to attract and retain key employees of the Company and its Subsidiaries (as hereinafter defined), to attract
and retain qualified directors of the Company, to attract and retain independent contractors, to encourage the sense of proprietorship
of such employees, directors and independent contractors and to stimulate the active interest of such persons in the development
and financial success of the Company and its Subsidiaries. These objectives are to be accomplished by making Awards (as hereinafter
defined) under this Plan and thereby providing Participants (as hereinafter defined) with a proprietary interest in the growth
and performance of the Company and its Subsidiaries.
3.
Definitions
.
As used herein, the terms set forth below shall have the following respective meanings:
“Authorized Officer”
means the Chairman of the Board or the Chief Executive Officer of the Company (or any other senior officer of the Company to whom
either of them shall delegate the authority to execute any Award Agreement).
“Award” means
an Employee Award, a Director Award or an Independent Contractor Award.
“Award Agreement”
means the document (in written or electronic form) setting forth the terms, conditions and limitations applicable to an Award.
Such agreement shall be written except that the Committee may, in its discretion, require or allow that the Participant electronically
execute or accept such Award Agreement.
“Board” means
the Board of Directors of the Company.
“Cash Award” means an Award denominated in cash.
“Change in Control”
is defined in Attachment A.
“Code” means the
Internal Revenue Code of 1986, as amended from time to time.
“Committee” means
(i) the Compensation Committee of the Board or (ii) such other committee of the Board as is designated by the Board to administer
this Plan or (iii) to the extent contemplated hereby, the Board.
“Common Stock”
means the common stock, par value $.01 per share, of the Company.
“Company” means Carrizo Oil & Gas, Inc., a Texas
corporation.
“Director” means
an individual serving as a member of the Board.
“Director Award”
means the grant of any Nonqualified Stock Option, SAR, Stock Award, Cash Award or Performance Award whether granted singly, in
combination or in tandem, to a Participant in his or her capacity as a Nonemployee Director pursuant to such applicable terms,
conditions and limitations as the Committee may establish in order to fulfill the objectives of this Plan.
“Dividend Equivalents”
means, with respect to the shares of Common Stock subject to a Stock Award, an amount equal to all dividends and other distributions
(or the economic equivalent thereof) that are payable to shareholders of record during the Restriction Period on a like number
of shares of Common Stock.
“Effective Date”
means May 16, 2017.
“Employee” means
an employee of the Company or any of its Subsidiaries.
“Employee Award”
means the grant of any Option, SAR, Stock Award, Cash Award or Performance Award whether granted singly, in combination or in tandem,
to a Participant who is an Employee pursuant to such applicable terms, conditions and limitations as the Committee may establish
in order to fulfill the objectives of this Plan.
“Exchange Act” means the Securities
Exchange Act of 1934, as amended from time to time.
Appendix A
“Fair Market Value” of a share of Common
Stock means, as of a particular date, (i)(A) if the shares of Common Stock are listed or on a national securities exchange (including
the NASDAQ Global Select Market), the closing price per share of the Common Stock on the consolidated transaction reporting system
for the principal national securities exchange on which shares of Common Stock are listed on that date, or, if there shall have
been no such sale so reported on that date, on the last preceding date on which such a sale was so reported, or, at the discretion
of the Committee, the price prevailing on the exchange at the time of exercise or other relevant event (as determined under procedures
established by the Committee) including the average of the closing bid and asked price on that date, (B) if the shares of Common
Stock are not so listed but are listed or quoted on another securities exchange or market, the closing price per share of Common
Stock reported on the principal securities exchange or market on which the shares of Common Stock are traded (as determined by
the Committee), or, if there shall have been no such sale so reported on that date, on the last preceding date on which such a
sale was so reported or, at the discretion of the Committee, the price prevailing on such principal securities exchange or market
at the time of exercise or other relevant event, including the average of the closing bid and asked price on that date, or, if
there are no quotations available for such date, on the last preceding date on which such quotations shall be available, (C) if
the shares of Common Stock are not publicly traded, the most recent value determined by an independent appraiser appointed by the
Company for such purpose, or (D) if none of (A)-(C) are applicable, the fair market value of a share of Common Stock as determined
in good faith by the Committee; or (ii) if applicable, the price per share as determined in accordance with the procedures of a
third party administrator retained by the Company to administer this Plan and as approved by the Committee.
“Incentive Option”
means an Option that is intended to comply with the requirements set forth in Section 422 of the Code.
“Independent Contractor”
means a person providing services to the Company or any of its Subsidiaries, who is not an Employee. An Independent Contractor
can include an individual who is serving as a Nonemployee Director.
“Independent Contractor
Award” means the grant of any Nonqualified Stock Option, SAR, Stock Award, Cash Award or Performance Award whether granted
singly, in combination or in tandem, to a Participant who is an Independent Contractor pursuant to such applicable terms, conditions
and limitations as the Committee may establish in order to fulfill the objectives of this Plan.
“Nonemployee Director”
means a Director who is not an Employee. A Nonemployee Director may, in the discretion of the Committee, receive an Award both
in the capacity as a Nonemployee Director and Independent Contractor.
“Nonqualified Stock
Option” means an Option that is not an Incentive Option.
“Option” means
a right to purchase a specified number of shares of Common Stock at a specified price, which is either an Incentive Option or a
Nonqualified Stock Option.
“Participant”
means an Employee, Nonemployee Director or Independent Contractor to whom an Award has been made under this Plan.
“Performance Award”
means an award made pursuant to this Plan to a Participant which is subject to the attainment of one or more Performance Goals.
“Performance Goal”
means a standard established by the Committee, to determine in whole or in part whether a Performance Award shall be
earned.
“Prior Plan” means
the Incentive Plan of Carrizo Oil & Gas, Inc., as amended and restated effective as of May 15, 2014 and as thereafter amended.
“Restricted Stock”
means any Common Stock that is restricted or subject to forfeiture provisions.
“Restriction Period”
means a period of time beginning as of the date upon which a Stock Award is made pursuant to this Plan and ending as of the date
upon which the Common Stock subject to such Award is deliverable or no longer restricted or subject to forfeiture provisions.
“Rule 16b-3” means
Rule 16b-3 promulgated under the Exchange Act, or any successor rule.
“SAR” means a right to receive
a payment, in cash or Common Stock, equal to the excess of the Fair Market Value or other specified valuation of a specified number
of shares of Common Stock on the date the right is exercised over a specified strike price, in each case, as determined by the
Committee.
Appendix A
“Stock Award” means an award in the
form of shares of Common Stock or units denominated in shares of Common Stock, including Restricted Stock. For the avoidance
of doubt, a Stock Award does not include an Option or SAR.
“Subsidiary” means (i) in the case
of a corporation, any corporation of which the Company directly or indirectly owns shares representing more than 50% of the combined
voting power of the shares of all classes or series of capital stock of such corporation which have the right to vote generally
on matters submitted to a vote of the stockholders of such corporation and (ii) in the case of a partnership or other business
entity not organized as a corporation, any such business entity of which the Company directly or indirectly owns more than 50%
of the voting, capital or profits interests (whether in the form of partnership interests, membership interests or otherwise).
4.
Eligibility
.
(a)
Employees
.
All employees are eligible for Employee Awards under this Plan.
(b)
Directors
.
All Nonemployee Directors are eligible for Director Awards under this Plan.
(c)
Independent
Contractors
. All Independent Contractors are eligible for Independent Contractor Awards under this Plan.
5.
Common
Stock Available for Awards
. Subject to the provisions of Section 15 hereof, there shall be available for Awards under
this Plan granted wholly or partly in Common Stock (including rights or Options that may be exercised for or settled in
Common Stock) an aggregate of 2,675,000 shares of Common Stock, plus the shares remaining available for awards under the
Prior Plan as of the Effective Date (the “Maximum Share Limit”), all of which shall be available for Incentive
Options. Each Stock Award (including Stock Awards granted as Restricted Stock or Performance Awards) granted under this Plan
shall be counted against the Maximum Share Limit as 1.35 shares of Common Stock. Each Option and SAR as to which it is
possible to be settled in Common Stock shall be counted against the Maximum Share Limit as one share of Common Stock. The
number of shares of Common Stock that are the subject of Awards under this Plan or the Prior Plan, that are forfeited or
terminated, expire unexercised, are settled in cash in lieu of Common Stock or are exchanged for Awards that do not involve
Common Stock, shall again immediately become available for additional Awards hereunder, and the Maximum Share Limit shall be
increased by the same amount as such shares of Common Stock were counted against the Maximum Share Limit (under this Plan or
the Prior Plan, as applicable). Notwithstanding the foregoing, the following shares of Common Stock may not again be made
available for issuance as Awards under this Plan: (i) shares of Common Stock not issued or delivered as a result of the net
settlement of an outstanding stock- settled SAR or Option, (ii) shares of Common Stock used to pay the exercise price or
withholding taxes related to an outstanding Award, or (iii) shares of Common Stock repurchased on the open market with the
proceeds of the option exercise price. For the avoidance of doubt, cash-settled SARs shall not count against the Maximum
Share Limit. The Board and the appropriate officers of the Company shall from time to time take whatever actions are
necessary to file any required documents with governmental authorities, stock exchanges and transaction reporting systems to
ensure that shares of Common Stock are available for issuance pursuant to Awards.
6.
Administration
.
(a)
This
Plan shall be administered by the Committee. To the extent required in order for Employee Awards to be exempt from Section 16 of
the Exchange Act by virtue of the provisions of Rule 16b-3, (i) the Committee shall consist of at least two members of the Board
who meet the requirements of the definition of “non-employee director” set forth in Rule 16b-3 (b)(3)(i) promulgated
under the Exchange Act or (ii) Awards may be granted by, and this Plan may be administered by, the Board.
(b)
Subject
to the provisions hereof, the Committee shall have full and exclusive power and authority to administer this Plan and to take all
actions that are specifically contemplated hereby or are necessary or appropriate in connection with the administration hereof.
The Committee shall also have full and exclusive power to interpret this Plan and to adopt such rules, regulations and guidelines
for carrying out this Plan as it may deem necessary or proper, all of which powers shall be exercised in the best interests of
the Company and in keeping with the objectives of this Plan. The Committee may, in its discretion, provide for the extension of
the exercisability of an Award, accelerate the vesting or exercisability of an Award, eliminate or make less restrictive any restrictions
contained in an Award, waive any restriction or other provision of this Plan or an Award or otherwise amend or modify an Award
in any manner that is either (i) not adverse to the Participant to whom such Award was granted or (ii) consented to by such Participant.
Notwithstanding the foregoing, except in connection with a transaction involving the Company or its capitalization (as provided
in Section 15), the terms of outstanding Awards may not be amended without approval of the shareholders of the Company to (i) reduce
the exercise price of outstanding Options or SARs or (ii) cancel, exchange, substitute,
Appendix A
buyout or surrender outstanding Options or SARs
in exchange for cash or other Awards when the exercise price of the original Options or SARs exceeds the Fair Market Value of one
share of Common Stock, (iii) take any other action with respect to an Option or SAR that would be treated as a repricing under
the rules and regulations of the principal national securities exchange on which the shares of Common Stock are listed or (iv)
permit the grant of any Options or SARs that contains a so-called “reload” feature under which additional Options,
SARs or other Awards are granted automatically to the Participant upon exercise of the original Option or SAR. The Committee may
make an Award to an individual who it expects to become an Employee, Nonemployee Director or Independent Contractor of the Company
or any of its Subsidiaries within the next six months, with such award being subject to the individual actually becoming an Employee,
Nonemployee Director or Independent Contractor, as applicable, within such time period, and subject to such other terms and conditions
as may be established by the Committee. The Committee may correct any defect or supply any omission or reconcile any inconsistency
in this Plan or in any Award in the manner and to the extent the Committee deems necessary or desirable to further the purposes
of this Plan. Any decision of the Committee in the interpretation and administration of this Plan shall lie within its sole and
absolute discretion and shall be final, conclusive and binding on all parties concerned.
(c)
No
member of the Committee or officer of the Company to whom the Committee has delegated authority in accordance with the provisions
of Section 7 of this Plan shall be liable for anything done or omitted to be done by him or her, by any member of the Committee
or by any officer of the Company in connection with the performance of any duties under this Plan, except for his or her own willful
misconduct or as expressly provided by statute.
7.
Delegation of
Authority
. The Committee may delegate to the Chief Executive Officer, to other senior officers of the Company or to other
committees of the Board its duties under this Plan pursuant to such conditions or limitations as the Committee may establish,
except that the Committee may not delegate to any person the authority to grant Awards to, or take other action with respect to,
Participants who are subject to Section 16 of the Exchange Act.
8.
Employee and
Independent Contractor Awards
.
(a)
The
Committee shall determine the type or types of Employee Awards to be made under this Plan and shall designate from time to time
the Employees who are to be the recipients of such Awards. Independent Contractor Awards shall be subject to the same terms and
restrictions as are set forth herein with respect to Employee Awards (including, without limitation, restrictions on term, exercise
price and per person limitations), and subject to such restrictions, the Committee shall have the sole responsibility and authority
to determine the type or types of Independent Contractor Awards to be made under this Plan and may make any such Awards as could
be made to an Employee, other than Incentive Options. The term of Options and SARs shall not exceed ten years from the date of
grant;
provided
,
however
, if the term of a Nonqualified Stock Option or SAR expires when trading in the Common Stock
is prohibited by applicable law or at a time in which there is a blackout period or restriction period under the Company’s
insider trading policy or practices (as then in effect), then the term of such Nonqualified Stock Option or SAR shall expire on
the 30th day after the expiration of such prohibition. Each Employee Award may be embodied in an Award Agreement, which shall contain
such terms, conditions and limitations as shall be determined by the Committee in its sole discretion and shall be signed by the
Participant to whom the Employee Award is made and by an Authorized Officer for and on behalf of the Company. Employee Awards may
consist of those listed in this Section 8(a) and may be granted singly, in combination or in tandem. Employee Awards may also be
made in combination or in tandem with, in replacement of, or as alternatives to, grants or rights under this Plan or any other
employee plan of the Company or any of its Subsidiaries, including the plan of any acquired entity. All or part of an Employee
Award may be subject to conditions established by the Committee, which may include, but are not limited to, continuous service
with the Company and its Subsidiaries, achievement of specific business objectives, increases in specified indices, attainment
of specified growth rates and other comparable measurements of performance. Upon the termination of employment by a Participant
who is an Employee, any unexercised, deferred, unvested or unpaid Employee Awards shall be treated as set forth in the applicable
Award Agreement.
(i)
Stock
Option
. An Employee Award may be in the form of an Option. An Option awarded pursuant to this Plan may consist of an Incentive
Option or a Nonqualified Option. The price at which shares of Common Stock may be purchased upon the exercise of an Option shall
be not less than the Fair Market Value of the Common Stock on the date of grant. Subject to the foregoing provisions, the terms,
conditions and limitations applicable to any Options awarded pursuant to this Plan, including the term of any Options and the
date or dates upon which they become exercisable, shall be determined by the Committee.
Appendix A
(ii)
Stock
Appreciation Right
. An Employee Award may be in the form of a SAR. The strike price for a SAR shall be not less than the
Fair Market Value of the Common Stock on the date on which the SAR is granted. The terms, conditions and limitations applicable
to any SARs awarded pursuant to this Plan, including the term of any SARs, whether the SAR will be settled in cash or stock and
the date or dates upon which they become exercisable, shall be determined by the Committee.
(iii)
Stock
Award
. An Employee Award may be in the form of a Stock Award. The terms, conditions and limitations applicable to any
Stock Awards granted pursuant to this Plan shall be determined by the Committee.
(iv)
Cash
Award
. An Employee Award may be in the form of a Cash Award. The terms, conditions and limitations applicable to any Cash
Awards granted pursuant to this Plan shall be determined by the Committee.
(v)
Performance
Award
. Without limiting the type or number of Employee Awards that may be made under the other provisions of this Plan,
an Employee Award may be in the form of a Performance Award. A Performance Award shall be paid, vested or otherwise deliverable
solely on account of the attainment of one or more pre- established, objective Performance Goals, either individually or in any
combination, established by the Committee prior to the earlier to occur of (x) 90 days after the commencement of the performance
period to which the Performance Goal relates and (y) the lapse of 25% of the performance period to which the Performance Goal
relates (as scheduled in good faith at the time the goal is established), and in any event while the outcome is substantially
uncertain. A Performance Goal is objective if a third party having knowledge of the relevant facts could determine whether the
goal is met. Such a Performance Goal may be based on one or more business criteria applicable to the Participant, the Company
as a whole, or one or more of the Company’s business units, subsidiaries, business segments, divisions, or geographic regions
measured either annually or over a period of years, on an absolute basis or relative to a pre-established target, to results over
a previous period or to a designated peer group, in each case as specified by the Committee in the Performance Award. The particular
performance-based objectives that may be imposed in connection with a Performance Award that qualifies as performance-based compensation
under Code Section 162(m) are as follows and need not be the same for each Participant:
● revenue and income measures (which
include revenues, revenues including the net cash impact of derivative settlements (“Adjusted Revenues”), gross margin,
operating income, earnings before or after the effect of certain items such as interest, income taxes, depreciation, depletion
and amortization, and non-cash or non-recurring items of income or expense (“Adjusted EBITDA”), net income before the
effect of certain non-cash or non-recurring items of income or expense (“Adjusted Net Income”), net income and related
per share amounts);
● expense measures (which include
operating expense, general and administrative expense and depreciation, depletion and amortization expense);
● operating measures (which include
production volumes, margin, drilling, completion, leasehold or seismic capital expenditures, results of drilling and completion
activities and the number of wells drilled, brought on production or producing);
● reserve measures (which include
developed, undeveloped and total reserves, reserve replacement ratios, extensions and discoveries, revisions of previous estimates,
PV-10 values, finding and development costs and other reserve measures);
● cash flow measures (which include
net cash flow flows from operating activities, discretionary cash flows from operating activities and working capital);
● liquidity measures (which include
Adjusted EBITDA, net debt to Adjusted EBITDA, working capital and the credit facility borrowing base);
● leverage measures (which include
debt-to-equity ratio, debt-to-total capitalization ratio, and net debt);
● market measures (which include
stock price, total shareholder return and market capitalization measures);
● return measures (which include
return on equity, return on assets and return on invested capital);
● corporate value measures (which
include compliance, safety, environmental and personnel matters); and
● measures relating to acquisitions or
dispositions.
Appendix A
Unless otherwise stated, such a Performance Goal
need not be based upon an increase or positive result under a particular business criterion and could include, for example, maintaining
the status quo or limiting economic losses (measured, in each case, by reference to specific business criteria). In interpreting
Plan provisions applicable to Performance Goals and Performance Awards, it is the intent of this Plan to conform with the standards
of Section 162(m) of the Code and Treasury Regulation § 1.162-27(e)(2)(i), and the Committee in establishing such goals and
interpreting this Plan shall be guided by such provisions. Prior to the payment of any compensation based on the achievement of
Performance Goals, the Committee must certify in writing that applicable Performance Goals and any of the material terms thereof
were, in fact, satisfied. At the time it establishes the Performance Goals, the Committee may provide in any such Performance Award
that any evaluation of performance may include or exclude any of the following events that occurs during a performance period:
(a) asset impairments, (b) litigation or claim judgments or settlements, (c) the effect of changes in tax laws, accounting principles,
or other laws or provisions affecting reported results, (d) any reorganization and restructuring programs, (e) unusual, infrequently
occurring, nonrecurring or one-time events affecting the Company or its financial statements as described in management’s
discussion and analysis of financial condition and results of operations appearing in the Company’s annual report to shareholders,
Form 10-K or Form 10-Q for the applicable period, (f) acquisitions
or divestitures, (g) foreign exchange gains and losses; (h) derivative settlements or (i) such other objective adjustments as may
be provided for connection with the establishment of the performance goal. The amount of cash or shares payable or vested pursuant
to Awards that are intended to be Performance Awards that are intended to satisfy the requirements of “qualified performance-based
compensation” under Section 162(m) of the Code (“Qualified Performance Awards”) may not be adjusted upward;
provided
,
however
, that the Committee may retain the discretion to adjust the amount of cash or shares payable or vested pursuant
to such Qualified Performance Awards downward, either on a formula or discretionary basis or any combination, as the Committee
determines. Subject to the foregoing provisions, the terms, conditions and limitations applicable to any Performance Awards made
pursuant to this Plan shall be determined by the Committee.
(b)
Notwithstanding
anything to the contrary contained in this Plan, the following limitations shall apply to any Employee Awards made hereunder:
(i)
no Participant may be granted, during any calendar
year, Employee Awards consisting of Options or SARs that are exercisable
for or relate to more than 375,000 shares of Common Stock;
(ii)
no Participant may be granted, during any calendar year, Stock Awards covering or relating
to more than 375,000 shares of Common Stock (the limitation set forth in this clause (ii), together with the limitation set forth
in clause (i) above, being hereinafter collectively referred to as the “Stock Based Awards Limitations”); and
(iii)
no Participant may be granted Cash Awards (including
Cash Awards that are granted as Performance Awards) in respect of any calendar year having
a value determined on the date of grant in excess of $5,000,000.
In general, each Award is only subject to a single
limitation set forth above in clauses (i), (ii), or (iii). However, a Participant may be granted Awards in combination such that
portions of the Award are subject to differing limitations set out in the clauses of this Section 8(b), in which event each portion
of the combination Award is subject only to a single appropriate limitation in clauses (i), (ii) or (iii). For example, if a Participant
is granted an Award that is in part a Stock Award and in part a Cash Award, then the Stock Award shall be subject only to the limitation
in clause (ii) and the Cash Award shall be subject only to the limitation in clause (iii).
9.
Director Awards
.
(a)
The
Board or the Committee may, in its discretion, grant Director Awards from time to time in accordance with this Section 9. Director
Awards may consist of the forms of Award described in Section 8, other than Incentive Options, and shall be granted subject to
such terms and conditions as specified in Section 8. Any Director Award shall be embodied in an Award Agreement, which shall contain
the terms, conditions and limitations of the Award, including without limitation those set forth in Section 8, and shall be signed
by the Participant to whom the Director Award is granted and by an Authorized Officer for and on behalf of the Company.
(b)
No
Nonemployee Director may be granted during any calendar year Director Awards having a fair value determined on the date of grant
when added to all cash compensation paid to the Nonemployee Director during the same calendar year in excess of $1,000,000.
Appendix A
10.
Payment of Awards
.
(a)
General
.
Payment of Awards may be made in the form of cash or Common Stock, or a combination thereof, and may include such restrictions
as the Committee shall determine, including, in the case of Common Stock, restrictions on transfer and forfeiture provisions. If
payment of an Award is made in the form of Restricted Stock, the right to receive such shares shall be evidenced by book entry
registration or in such other manner as the Committee may determine. Any statement of ownership evidencing such Restricted Stock
shall contain appropriate legends and restrictions that describe the terms and conditions of the restrictions applicable thereto.
(b)
Dividends
and Interest
. In the discretion of the Committee, rights to dividends or Dividend Equivalents may be extended to and made part
of any Stock Award, but such dividends or Dividend Equivalents shall be accrued and held by the Company and paid, without interest,
within 10 days following the lapse of the restrictions on the Stock Award. For the avoidance of doubt, dividends and dividend equivalents
will not, in any event, be payable until the restrictions on the underlying Stock Award have lapsed. In the event the Stock Award
is forfeited, dividends and Dividend Equivalents paid with respect to such shares during the Restriction Period shall also be forfeited.
No Dividend Equivalents may be paid in respect of an Award of Options or SARs.
(c)
Substitution
of Awards
. Subject to the provisions of Section 6(b), at the discretion of the Committee, a Participant may be offered an election
to substitute an Award for another Award or Awards of the same or different type. No Option or SAR may be substituted for another
Award without the approval of the shareholders of the Company (except in connection with a change in the Company’s capitalization
or as otherwise provided in Section 15 hereof).
11.
Stock Option Exercise
.
The price at which shares of Common Stock may be purchased under an Option shall be paid in full at the time of exercise in cash
or, if elected by the optionee, the optionee may purchase such shares by means of tendering Common Stock valued at Fair Market
Value on the date of exercise, or any combination thereof. The Committee shall determine acceptable methods for Participants to
tender Common Stock. The Committee may provide for procedures to permit the exercise or purchase of such Awards by use of the
proceeds to be received from the sale of Common Stock issuable pursuant to an Award.
12.
Taxes
. The
Company shall have the right to deduct applicable taxes from any Award payment and withhold, at the time of delivery or vesting
of cash or shares of Common Stock under this Plan, an appropriate amount of cash or number of shares of Common Stock or a combination
thereof for payment of taxes required by law or to take such other action as may be necessary in the opinion of the Company to
satisfy all obligations for withholding of such taxes. The Committee may also permit withholding to be satisfied by (i) the transfer
to the Company of shares of Common Stock theretofore owned by the holder of the Award or (ii) withholding from the shares otherwise
deliverable under the Award, in either case with respect to which withholding is required, up to the maximum tax rate applicable
to the Participant, as determined by the Committee. If shares of Common Stock are used to satisfy tax withholding, such shares
shall be valued based on the Fair Market Value when the tax withholding is required to be made. To the extent allowed by law,
the Committee may provide for loans, on either a short term or demand basis, from the Company to a Participant who is an Employee
to permit the payment of taxes required by law.
13.
Amendment, Modification,
Suspension or Termination
. The Board may amend, modify, suspend or terminate this Plan for the purpose of meeting or addressing
any changes in legal requirements or for any other purpose permitted by law, except that (i) no amendment or alteration that would
adversely affect the rights of any Participant under any Award previously granted to such Participant shall be made without the
consent of such Participant and (ii) no amendment or alteration shall be effective prior to its approval by the shareholders of
the Company to the extent such approval is then required pursuant to Rule 16b-3 in order to preserve the applicability of any
exemption provided by such rule to any Award then outstanding (unless the holder of such Award consents) or to the extent shareholder
approval is otherwise required by applicable legal requirements.
14.
Assignability
.
Unless otherwise determined by the Committee and provided in the Award Agreement, no Award or any other benefit under this Plan
constituting a derivative security within the meaning of Rule 16a-1(c) under the Exchange Act shall be assignable or otherwise
transferable except by will or the laws of descent and distribution or pursuant to a qualified domestic relations order as defined
by the Code or Title I of the Employee Retirement Income Security Act, or the rules thereunder. The Committee may prescribe and
include in applicable Award Agreements other restrictions on transfer. Any attempted assignment of an Award or any other benefit
under this Plan in violation of this Section 14 shall be null and void.
Appendix A
15.
Adjustments
.
(a)
The
existence of outstanding Awards shall not affect in any manner the right or power of the Company or its shareholders to make or
authorize any or all adjustments, recapitalizations, reorganizations or other changes in the capital stock of the Company or its
business or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or prior preference stock
(whether or not such issue is prior to, on a parity with or junior to the Common Stock) or the dissolution or liquidation of the
Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding of any
kind, whether or not of a character similar to that of the acts or proceedings enumerated above.
(b)
In
the event of any subdivision or consolidation of outstanding shares of Common Stock, declaration of a dividend payable in shares
of Common Stock or other stock split, then (i) the number of shares of Common Stock reserved under this Plan, (ii) the number of
shares of Common Stock covered by outstanding Awards in the form of Common Stock or units denominated in Common Stock, (iii) the
exercise or other price in respect of such Awards, (iv) the appropriate Fair Market Value and other price determinations for such
Awards, and (v) the Stock Based Awards Limitations shall each be proportionately adjusted by the Board to reflect such transaction.
In the event of any other recapitalization or capital reorganization of the Company, any consolidation or merger of the Company
with another corporation or entity, the adoption by the Company of any plan of exchange affecting the Common Stock or any distribution
to holders of Common Stock of securities or property (other than normal cash dividends or dividends payable in Common Stock), the
Board shall make appropriate adjustments to (i) the number of shares of Common Stock covered by Awards in the form of Common Stock
or units denominated in Common Stock, (ii) the exercise or other price in respect of such Awards, (iii) the appropriate Fair Market
Value and other price determinations for such Awards, and (iv) the Stock Based Awards Limitations to give effect to such transaction
shall each be proportionately adjusted by the Board to reflect such transaction; provided that such adjustments shall only be such
as are necessary to maintain the proportionate interest of the holders of the Awards and preserve, without exceeding, the value
of such Awards. In the event of a corporate merger, consolidation, acquisition of property or stock, separation, reorganization
or liquidation, the Board shall be authorized to issue or assume Awards by means of substitution of new Awards, as appropriate,
for previously issued Awards or to assume previously issued Awards as part of such adjustment.
(c)
In
the event of a corporate merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation, the
Board may make such adjustments to outstanding Awards or other provisions for the disposition of outstanding Awards as it deems
equitable, and shall be authorized, in its discretion, (i) to provide for the substitution of a new Award or other arrangement
(which, if applicable, may be exercisable for such property or stock as the Board determines) for an outstanding Award or the assumption
of an outstanding Award, regardless of whether in a transaction to which Section 424(a) of the Code applies, (ii) to provide, prior
to the transaction, for the acceleration of the vesting and exercisability of, or lapse of restrictions with respect to, the outstanding
Award and, if the transaction is a cash merger, to provide for the termination of any portion of the Award that remains unexercised
at the time of such transaction or (iii) to provide for the acceleration of the vesting and exercisability of an outstanding Award
and the cancellation thereof in exchange for such payment of such cash or property as shall be determined by the Board in its sole
discretion, which for the avoidance of doubt in the case of Options or SARs (whether stock- or cash-settled) shall be the excess,
if any, of the Fair Market Value of the shares of Common Stock subject to the Option or SAR on such date over the aggregate exercise
price of such Award;
provided
,
however
, that no such adjustment shall increase the aggregate value of any outstanding
Award. No adjustment or substitution pursuant to this Section 15 shall be made in a manner that results in noncompliance with Section
409A of the Code, to the extent applicable.
16.
Restrictions
.
No Common Stock or other form of payment shall be issued with respect to any Award unless the Company shall be satisfied based
on the advice of its counsel that such issuance will be in compliance with applicable federal and state securities laws. It is
the intent of the Company that grants of Awards under this Plan comply with Rule 16b-3 with respect to persons subject to Section
16 of the Exchange Act unless otherwise provided herein or in an Award Agreement and that any ambiguities or inconsistencies in
the construction of such an Award or this Plan be interpreted to give effect to such intention. Certificates evidencing shares
of Common Stock delivered under this Plan (to the extent that such shares are so evidenced) may be subject to such stop transfer
orders and other restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Securities
and Exchange Commission, any securities exchange or transaction reporting system upon which the Common Stock is then listed or
to which it is admitted for quotation and any applicable federal or state securities law. The Committee may cause a legend or
legends to be placed upon such certificates (if any) to make appropriate reference to such restrictions. The Committee may also
impose such restrictions, conditions or limitations as it determines appropriate as to the timing and manner
Appendix A
of any resales by a Participant, other subsequent
transfers by the Participant of any shares of Common Stock issued as a result of or under an Award, or the exercise of Options
and SARs, including without limitation, restrictions under an insider trading policy.
17.
Unfunded Plan
.
Insofar as it provides for Awards of cash, Common Stock or rights thereto, this Plan shall be unfunded. Although bookkeeping accounts
may be established with respect to Participants who are entitled to cash, Common Stock or rights thereto under this Plan, any
such accounts shall be used merely as a bookkeeping convenience. The Company shall not be required to segregate any assets that
may at any time be represented by cash, Common Stock or rights thereto, nor shall this Plan be construed as providing for such
segregation, nor shall the Company, the Board or the Committee be deemed to be a trustee of any cash, Common Stock or rights thereto
to be granted under this Plan. Any liability or obligation of the Company to any Participant with respect to an Award of cash,
Common Stock or rights thereto under this Plan shall be based solely upon any contractual obligations that may be created by this
Plan and any Award Agreement, and no such liability or obligation of the Company shall be deemed to be secured by any pledge or
other encumbrance on any property of the Company. Neither the Company nor the Board nor the Committee shall be required to give
any security or bond for the performance of any obligation that may be created by this Plan.
18.
Section 409A of the
Code
. All Awards under this Plan are intended either to be exempt from, or to comply with the requirements of Section
409A, and this Plan and all Awards shall be interpreted and operated in a manner consistent with that intention. Notwithstanding
anything in this Plan to the contrary, if any Plan provision or Award under this Plan would result in the imposition of an applicable
tax under Section 409A, that Plan provision or Award shall be reformed to avoid imposition of the applicable tax and no such action
shall be deemed to adversely affect the Participant’s rights to an Award.
19.
Governing Law
.
This Plan and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by mandatory provisions
of the Code or the securities laws of the United States, shall be governed by and construed in accordance with the laws of the
State of Texas.
20.
Clawback
.
To the extent required by applicable law or any applicable securities exchange listing standards, or as otherwise determined by
the Committee, Awards and amounts paid or payable pursuant to or with respect to Awards shall be subject to the provisions of
any clawback policy implemented by the Company, which clawback policy may provide for forfeiture, repurchase or recoupment of
Awards and amounts paid or payable pursuant to or with respect to Awards. Notwithstanding any provision of this Plan or any Award
Agreement to the contrary, the Company reserves the right, without the consent of any Participant, to adopt any such clawback
policies and procedures.
21.
No Right to Employment
or Continued Service
. Nothing in this Plan or an Award Agreement shall interfere with or limit in any way the right of
the Company or a Subsidiary to terminate any Participant’s employment or other service relationship at any time, nor confer
upon any Participant any right to continue in the capacity in which he or she is employed or otherwise serves the Company or any
Subsidiary. Further, nothing in this Plan or an Award Agreement constitutes any assurance or obligation of the Board to nominate
any Nonemployee Director for re-election by the Company’s shareholders.
22.
Successors
.
All obligations of the Company under this Plan with respect to Awards granted hereunder shall be binding on any successor to the
Company by merger, consolidation or otherwise.
23.
Effectiveness
. This Plan,
as approved by the Board on April 7, 2017, shall be effective as of the Effective Date, the date on which it was approved by the
shareholders of the Company. This Plan shall continue in effect for a term of ten years after the Effective Date, unless sooner
terminated by action of the Board. Notwithstanding the foregoing, the adoption of this Plan is expressly conditioned upon the
approval by the holders of a majority of shares of Common Stock present, or represented, and entitled to vote at a meeting of
the Company’s shareholders at the Company’s 2017 annual shareholders meeting to be held on May 16, 2017 or any adjournment
or postponement thereof. If the shareholders of the Company should fail to so approve this Plan on such date, this Plan shall
not be of any force or effect and the Prior Plan shall continue in force and effect.
IN WITNESS WHEREOF, the Company has caused this
Plan to be executed by its duly authorized officer.
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CARRIZO OIL & GAS, INC.
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By:
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Title:
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Appendix A
ATTACHMENT
A
“CHANGE
IN CONTROL”
The following definitions apply regarding Change
in Control provisions of the foregoing Plan:
“Affiliate” shall have the meaning
ascribed to such term in Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as in effect on the date of this
Agreement.
“Associate” shall mean, with reference
to any Person, (a) any corporation, firm, partnership, association, unincorporated organization or other entity (other than the
Company or a subsidiary of the Company) of which such Person is an officer or general partner (or officer or general partner of
a general partner) or is, directly or indirectly, the Beneficial Owner of 10% or more of any class of equity securities, (b) any
trust or other estate in which such Person has a substantial beneficial interest or as to which such Person serves as trustee or
in a similar fiduciary capacity and (c) any relative or spouse of such Person, or any relative of such spouse, who has the same
home as such Person.
“Beneficial Owner” shall mean, with
reference to any securities, any Person if:
(a)
such Person or any of such Person’s Affiliates and Associates, directly or indirectly,
is the “beneficial owner” of (as determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange
Act, as in effect on the date of this Agreement) such securities or otherwise has the right to vote or dispose of such securities,
including pursuant to any agreement, arrangement or understanding (whether or not in writing);
provided
,
however
,
that a Person shall not be deemed the “Beneficial Owner” of, or to “beneficially own,” any security under
this subsection (a) as a result of an agreement, arrangement or understanding to vote such security if such agreement, arrangement
or understanding: (i) arises solely from a revocable proxy or consent given in response to a public (i.e., not including a solicitation
exempted by Rule 14a-2(b)(2) of the General Rules and Regulations under the Exchange Act) proxy or consent solicitation made pursuant
to, and in accordance with, the applicable provisions of the General Rules and Regulations under the Exchange Act and (ii) is not
then reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or successor report);
(b)
such Person or any of such Person’s Affiliates and Associates, directly or indirectly,
has the right or obligation to acquire such securities (whether such right or obligation is exercisable or effective immediately
or only after the passage of time or the occurrence of an event) pursuant to any agreement, arrangement or understanding (whether
or not in writing) or upon the exercise of conversion rights, exchange rights, other rights, warrants or options, or otherwise;
provided
,
however
, that a Person shall not be deemed the Beneficial Owner of, or to “beneficially own,”
(i) securities tendered pursuant to a tender or exchange offer made by such Person or any of such Person’s Affiliates or
Associates until such tendered securities are accepted for purchase or exchange or (ii) securities issuable upon exercise of Exempt
Rights; or
(c)
such Person or any such Person’s Affiliates or Associates (i) has any agreement, arrangement
or understanding (whether or not in writing) with any other Person (or any Affiliate or Associate thereof) that beneficially owns
such securities for the purpose of acquiring, holding, voting (except as set forth in the proviso to subsection (a) of this definition)
or disposing of such securities or (ii) is a member of a group (as that term is used in Rule 13d-5(b) of the General Rules and
Regulations under the Exchange Act) that includes any other Person that beneficially owns such securities;
provided
,
however
,
that nothing in this definition shall cause a Person engaged in business as an underwriter of securities to be the Beneficial Owner
of, or to “beneficially own,” any securities acquired through such Person’s participation in good faith in a
firm commitment underwriting until the expiration of 40 days after the date of such acquisition. For purposes hereof, “voting”
a security shall include voting, granting a proxy, consenting or making a request or demand relating to corporate action (including,
without limitation, a demand for stockholder list, to call a stockholder meeting or to inspect corporate books and records) or
otherwise giving an authorization (within the meaning of Section 14(a) of the Exchange Act) in respect of such security.
The terms “beneficially own” and
“beneficially owning” shall have meanings that are correlative to this definition of the term “Beneficial Owner”.
Appendix A
“Change in Control” shall mean any
of the following:
(a)
any Person (other than an Exempt Person) shall become the Beneficial Owner of 40% or more of
the shares of Common Stock then outstanding or 40% or more of the combined voting power of the Voting Stock of the Company then
outstanding;
provided
,
however
, that no Change in Control shall be deemed to occur for purposes of this subsection
(a) if such Person shall become a Beneficial Owner of 40% or more of the shares of Common Stock or 40% or more of the combined
voting power of the Voting Stock of the Company solely as a result of (i) an Exempt Transaction or (ii) an acquisition by a Person
pursuant to a reorganization, merger or consolidation, if, following such reorganization, merger or consolidation, the conditions
described in clauses (i), (ii) and (iii) of subsection (c) of this definition are satisfied; or
(b)
individuals who, as of the Effective Date, constitute the Board (the “Incumbent Board”)
cease for any reason to constitute at least a majority of the Board;
provided
,
however
, that any individual becoming
a director subsequent to the Effective Date whose election, or nomination for election by the Company’s shareholders, was
approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board; provided, further, that there shall be excluded, for this purpose, any such individual
whose initial assumption of office occurs as a result of any actual or threatened election contest; or
(c)
the Company engages in and completes a reorganization, merger or consolidation, in each case,
unless, following such reorganization, merger or consolidation, (i) more than 85% of the then outstanding shares of common stock
of the corporation resulting from such reorganization, merger or consolidation and the combined voting power of the then outstanding
Voting Stock of such corporation beneficially owned, directly or indirectly, by all or substantially all of the Persons who were
the Beneficial Owners of the outstanding Common Stock immediately prior to such reorganization, merger, or consolidation in substantially
the same proportions as their ownership, immediately prior to such reorganization, merger or consolidation, of the outstanding
Common Stock, (ii) no Person (excluding any Exempt Person or any Person beneficially owning, immediately prior to such reorganization,
merger or consolidation, directly or indirectly, 40% or more of the Common Stock then outstanding or 40% or more of the combined
voting power of the Voting Stock of the Company then outstanding) beneficially owns, directly or indirectly, 40% or more of the
then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation or the combined
voting power of the then outstanding Voting Stock of such corporation and (iii) at least a majority of the members of the board
of directors of the corporation resulting from such reorganization, merger or consolidation were members of the Incumbent Board
at the time of the execution of the initial agreement or initial action by the Board providing for such reorganization, merger
or consolidation; or
(d)
the Company engages in and completes (i) a complete liquidation or dissolution of the Company
unless such liquidation or dissolution is approved as part of a plan of liquidation and dissolution involving a sale or disposition
of all or substantially all of the assets of the Company to a corporation with respect to which, following such sale or other disposition,
all of the requirements of clauses (ii) (A), (B) and (C) of this subsection (d) are satisfied, or (ii) the sale or other disposition
of all or substantially all of the assets of the Company, other than to a corporation, with respect to which, following such sale
or other disposition, (A) more than 85% of the then outstanding shares of common stock or such corporation and the combined voting
power of the Voting Stock of such corporation is then beneficially owned, directly or indirectly, by all or substantially all of
the Persons who were the Beneficial Owners of the outstanding Common Stock immediately prior to such sale or other disposition
in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the outstanding
Common Stock, (B) no Person (excluding any Exempt Person and any Person beneficially owning, immediately prior to such sale or
other disposition, directly or indirectly, 40% or more of the Common Stock then outstanding or 40% or more of the combined voting
power of the Voting Stock of the Company then outstanding) beneficially owns, directly or indirectly, 40% or more of the then outstanding
shares of common stock of such corporation and the combined voting power of the then outstanding Voting Stock of such corporation
and (C) at least a majority of the members of the board of directors of such corporation were members of the Incumbent Board at
the time of the execution of the initial agreement or initial action of the Board providing for such sale or other disposition
of assets of the Company.
“Exchange Act” shall mean the Securities
Exchange Act of 1934, as amended.
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2017
PROXY STATEMENT
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A-11
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Appendix
A
“Exempt Person” shall mean the Company,
any subsidiary of the Company, any employee benefit plan of the Company or any subsidiary of the Company, and any Person organized,
appointed or established by the Company for or pursuant to the terms of any such plan.
“Exempt Rights” shall mean any rights
to purchase shares of Common Stock or other Voting Stock of the Company if at the time of the issuance thereof such rights are
not separable from such Common Stock or other Voting Stock (i.e., are not transferable otherwise than in connection with a transfer
of the underlying Common Stock or other Voting Stock) except upon the occurrence of a contingency, whether such rights exist as
of the Effective Date or are thereafter issued by the Company as a dividend on shares of Common Stock or other Voting Securities
or otherwise.
“Exempt Transaction” shall mean an
increase in the percentage of the outstanding shares of Common Stock or the percentage of the combined voting power of the outstanding
Voting Stock of the Company beneficially owned by any Person solely as a result of a reduction in the number of shares of Common
Stock then outstanding due to the repurchase of Common Stock or Voting Stock by the Company, unless and until such time as (a)
such Person or any Affiliate or Associate of such Person shall purchase or otherwise become the Beneficial Owner of additional
shares of Common Stock constituting 1% or more of the then outstanding shares of Common Stock or additional Voting Stock representing
1% or more of the combined voting power of the then outstanding Voting Stock, or (b) any other Person (or Persons) who is (or collectively
are) the Beneficial Owner of shares of Common Stock constituting 1% or more of the then outstanding shares of Common Stock or Voting
Stock representing 1% or more of the combined voting power of the then outstanding Voting Stock shall become an Affiliate or Associate
of such Person.
“Person” shall mean any individual,
firm, corporation, partnership, association, trust, unincorporated organization or other entity.
“Voting Stock” shall mean, with respect
to a corporation, all securities of such corporation of any class or series that are entitled to vote generally in the election
of directors of such corporation (excluding any class or series that would be entitled so to vote by reason of the occurrence of
any contingency, so long as such contingency has not occurred).
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CARRIZO
OIL & GAS, INC.
500 DALLAS STREET, SUITE 2300
HOUSTON, TX 77002
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VOTE
BY INTERNET -
www.proxyvote.com
or scan the QR Barcode above
Use
the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time
the day before the cut-off date or meeting date. Follow the instructions to obtain your records and to create an electronic voting
instruction form.
ELECTRONIC
DELIVERY OF FUTURE PROXY MATERIALS
If
you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future
proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery,
please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access
proxy materials electronically in future years.
VOTE
BY PHONE - 1-800-690-6903
Use
any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date
or meeting date. Have your proxy card in hand when you call and then follow the instructions.
VOTE
BY MAIL
Mark,
sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o
Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK
AS FOLLOWS:
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E23685-P88716
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KEEP
THIS PORTION FOR YOUR RECORDS
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DETACH AND RETURN THIS
PORTION ONLY
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THIS
PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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CARRIZO
OIL & GAS, INC.
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For
All
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Withhold All
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For All Except
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The
Board of Directors recommends you vote FOR ALL the following Nominees:
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1.
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Election of Directors
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☐
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☐
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☐
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Nominees
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01) S.P. Johnson IV 05)
Robert F. Fulton
02) Steven A. Webster 06)
Roger A. Ramsey
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03) F. Gardner Parker 07)
Frank A. Wojtek
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04)
Thomas L. Carter, Jr.
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The Board of Directors recommends
you vote FOR proposal 2:
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For
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Against
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Abstain
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2.
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To
approve, on a non-binding advisory basis, the compensation of the Company’s named executive officers
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☐
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☐
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☐
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The Board of Directors recommends
you vote 1 YEAR for proposal 3:
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1 Year
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2 Years
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3 Year
s
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Abstain
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3.
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To
select, on an advisory basis, the frequency of future advisory votes to approve the compensation of the Company’s named
executive officers
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☐
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☐
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☐
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For address change/comments, mark here.
(see reverse for instructions)
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☐
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Please indicate if you plan to attend this meeting.
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☐
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☐
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Yes
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No
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To
withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of
the nominee(s) on the line below.
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The Board of Directors recommends
you vote FOR proposals 4, 5 and 6:
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For
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Against
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Abstain
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4.
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To
amend our Amended and Restated Articles of Incorporation to increase the number of authorized shares of common stock from 90,000,000
to 180,000,000
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☐
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☐
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☐
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5.
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To
approve the 2017 Incentive Plan of Carrizo Oil & Gas, Inc.
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☐
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☐
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☐
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6.
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To
ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending
December 31, 2017
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☐
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☐
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☐
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NOTE:
Such other business as may properly come before the meeting or any adjournment thereof
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Please
sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give
full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign
in full corporate or partnership name by authorized officer.
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Signature [PLEASE SIGN WITHIN BOX]
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Date
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Signature (Joint Owners)
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Date
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V.1.1
Important
Notice Regarding the Internet Availability of Proxy Materials for the Annual Meeting of
Shareholders to be Held on May 16, 2017:
The
Company’s Notice of Annual Meeting of Shareholders, Proxy Statement and 2016 Annual Report to
Shareholders are available on the Internet at
www.proxyvote.com
.
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CARRIZO
OIL & GAS, INC.
Annual Meeting of Shareholders
May 16, 2017 9:00 AM
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This
proxy is solicited by the Board of Directors
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The
shareholder(s) hereby appoint(s) Gerald A. Morton and Marcus G. Bolinder, or either of
them, as proxies, each with the power to appoint his substitute, and hereby authorize(s)
them to represent and to vote, as designated on the reverse side of this ballot, all
of the shares of common stock of CARRIZO OIL & GAS, INC. that the shareholder(s)
is/are entitled to vote at the Annual Meeting of Shareholders to be held at 9:00 AM,
CDT on May 16, 2017, at Two Allen Center, The Forum, located at 1200 Smith Street, 12
th
Floor, Houston, Texas 77002, and any adjournment or postponement thereof.
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This
proxy, when properly executed, will be voted in the manner directed herein. If no such
direction is made, this proxy will be voted in accordance with the Board of Directors’
recommendations.
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Address
Changes/Comments:
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(If
you noted any Address Changes and/or Comments above, please mark corresponding box on the reverse side.)
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Continued
and to be signed on reverse side
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V.1.1