Exhibit 10.6
Execution Copy
EMPLOYMENT AGREEMENT
This AGREEMENT (the "Agreement") by and between Carrizo Oil &
Gas, Inc., a Texas corporation (the "Company"), and Richard H.
Smith (the "Executive"), to be effective as of the 5th day of June,
2009 (the "Agreement Effective Date").
In entering into this Agreement, the Board of Directors of the
Company (the "Board") desires to provide the Executive with
substantial incentives to serve the Company as one of its senior
executives performing at the highest level of leadership and
stewardship, without distraction or concern over minimum
compensation, benefits or tenure, to manage the Company's future
growth and development, and maximize the returns to the Company's
stockholders. This Agreement is intended to amend and
supersede in its entirety any prior employment agreement between
the Executive and the Company (the “Prior Employment
Agreement”).
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1.
Employment Period . As of the Agreement Effective Date, the
Company hereby agrees to employ the Executive and the Executive
hereby agrees to accept employment with the Company, in accordance
with, and subject to, the terms and provisions of this Agreement,
for the period (the "Employment Period") commencing on the
Agreement Effective Date and ending on the first anniversary of the
Agreement Effective Date; provided, on the Agreement Effective Date
and on each day thereafter, the Employment Period shall
automatically be extended for an additional one day without any
further action by either the Company or the Executive, it being the
intention of the parties that there shall be continuously a
remaining term of not less than one year's duration of the
Employment Period until an event has occurred as described in, or
one of the parties shall have made an appropriate election and
notification pursuant to, the provisions of Section 3.
2.
Terms of Employment .
(a)
Position and Duties . As of the Agreement Effective Date,
the Executive shall become a full time employee and company officer
with the title and responsibilities of Vice President of Land and
during the Employment Period, excluding any periods of vacation and
sick leave to which the Executive is entitled, the Executive agrees
to devote full attention and time during normal business hours to
the business and affairs of the Company and, to the extent
necessary to discharge the responsibilities assigned to the
Executive hereunder, to use the Executive's reasonable best efforts
to perform faithfully and efficiently such responsibilities. During
the Employment Period, it shall not be a violation of this
Agreement for the Executive to (A) serve on corporate, civic,
educational, alumni or charitable boards or committees, (B) deliver
lectures, fulfill speaking engagements or teach at educational
institutions or (C) manage personal investments, so long as such
activities do not materially interfere with the performance of the
Executive's responsibilities as an employee of the Company in
accordance with this Agreement; provided that the Executive may not
serve on the board of a publicly traded for profit corporation, or
similar body of a publicly traded for profit business organized in
other than corporate form, without the consent of the Nominating
and Corporate Governance Committee of the Board.
(b)
Compensation .
(i)
Base Salary . Commencing on the Agreement Effective Date and
thereafter during his Employment Period, the Executive shall
receive an annual base salary of $215,000 (as such salary may be
increased from time to time, the "Annual Base Salary"), which shall
be paid on a semimonthly basis. During the Employment Period, the
Annual Base Salary shall be reviewed at least annually and shall be
increased at any time and from time to time as shall be
substantially consistent with increases in base salary generally
awarded in the ordinary course of business to executives of the
Company and its affiliated companies. Any increase in Annual Base
Salary shall not serve to limit or reduce any other obligation to
the Executive under this Agreement. As used in this Agreement, the
term "affiliated companies" shall include, when used with reference
to the Company, any company controlled by, controlling or under
common control with the Company.
(ii)
Annual Bonus . In addition to Annual Base Salary, the
Executive may be awarded, for each fiscal year or portion thereof
during the Employment Period, an Annual Bonus (the "Annual Bonus"),
in an amount comparable to the Annual Bonus award to other Company
executives, taking into account the Executive's position,
responsibilities, and accomplishments with the Company, prorated
for any period consisting of less than 12 full months.
(iii)
Incentive, Savings and Retirement Plans . During the
Employment Period, the Executive shall be entitled to participate
in all incentive, savings and retirement plans that are
tax-qualified under Section 401(a) of the Internal Revenue Code of
1986, as amended ("Code"), and all plans that are supplemental to
any such tax-qualified plans, in each case to the extent that such
plans are applicable generally to other similarly situated
executive employees of the Company and its affiliated
companies.
(iv)
Welfare Benefit Plans . During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall
be eligible for participation in and shall receive all benefits
under welfare benefit plans, practices, policies and programs
provided by the Company or its affiliated companies (including,
without limitation, medical, prescription, dental, vision,
disability, salary continuance, group life and supplemental group
life, accidental death and travel accident insurance plans and
programs) to the extent applicable generally to other similarly
situated executive employees of the Company and its affiliated
companies.
(v)
Expenses . During the Employment Period, the Executive shall
be entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the policies,
practices and procedures of the Company and its affiliated
companies.
(vi)
Vacation . During the Employment Period, the Executive shall
be entitled to paid vacation in accordance with the plans,
policies, programs and practices of the Company and its affiliated
companies.
3.
Termination of Employment .
(a)
Death or Disability . The Executive's employment shall
terminate automatically upon the Executive's death during the
Employment Period. If the Company determines in good faith that the
Disability of the Executive has occurred during the Employment
Period (pursuant to the definition of Disability set forth below),
it may give to the Executive written notice in accordance with
Section 13(d) of this Agreement of its intention to terminate the
Executive's employment. In such event, the Executive's employment
with the Company shall terminate effective on the 30th day after
receipt of such notice by the Executive (the "Disability Effective
Date"), provided that, within the 30 days after such receipt, the
Executive shall not have returned to full-time performance of the
Executive's duties. For the purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the
Executive's duties with the Company on a full-time basis for either
(i) 180 consecutive business days or (ii) in any two-year period
270 nonconsecutive business days as a result of incapacity due to
mental or physical illness which is determined to be total and
permanent by a physician selected by the Company or its insurers
and acceptable to the Executive or the Executive's legal
representative (such agreement as to acceptability not to be
withheld unreasonably). In the event the Executive
incurs a separation from service within the meaning of Treasury
Regulation § 1.409A-1(h) as a result of his incapacity, then
the Disability Effective Date shall be deemed to be the date of the
Executive’s separation from service.
(b) Cause . The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes of
this Agreement, "Cause" shall mean for the Company's termination of
the Executive's employment for any of the following: (i) the
Executive's final conviction of a felony crime that enriched the
Executive at the expense of the Company; provided, however, that
after indictment, the Company may suspend the Executive
from the rendition of services, but without limiting or modifying
in any other way the Company's obligations under this Agreement;
(ii) a breach by the Executive of a fiduciary duty owed to the
Company; (iii) a breach by the Executive of any of the covenants
made by him in Sections 8 and 10 hereof; (iv) the willful and gross
neglect by the Executive of the duties specifically and expressly
required by this Agreement; or (v) the Executive's continuing
failure to substantially perform his duties and responsibilities
hereunder (except by reason of the Executive's incapacity due to
physical or mental illness or injury) for a period of 45 days after
the Required Board Majority, as defined herein, has delivered to
the Executive a written demand for substantial performance
hereunder which specifically identifies the bases for the Required
Board Majority's determination that the Executive has not
substantially performed his duties and responsibilities hereunder
(that period being the "Grace Period"); provided, that for purposes
of this clause (v), the Company shall not have Cause to terminate
the Executive's employment unless (A) at a meeting of the Board
called and held following the Grace Period in the city in which the
Company's principal executive offices are located, of which the
Executive was given not less than 10 days' prior written notice and
at which the Executive was afforded the opportunity to be
represented by counsel, appear and be heard, the Required Board
Majority shall adopt a written resolution which (1) sets forth the
Required Board Majority's determination that the failure of the
Executive to
substantially perform his duties and responsibilities hereunder has
(except by reason of his incapacity due to physical or mental
illness or injury) continued past the Grace Period and (2)
specifically identifies the bases for that determination, and (B)
the Company, at the written direction of the Required Board
Majority, shall deliver to the Executive a Notice of Termination
for Cause to which a copy of that resolution, certified as being
true and correct by the secretary or any assistant secretary of the
Company, is attached. "Required Board Majority" means at
any time a majority of the members of the Board at that time which
includes at least a majority of the Directors, each of whom has not
been an employee of the Company or any subsidiary of the
Company.
(c)
Good Reason; Window Period; Other Terminations . The
Executive's employment may be terminated during the Employment
Period by the Executive for Good Reason, or during a Window Period
by the Executive without any reason or at any time by the Executive
other than for Good Reason or during a Window
Period. For the avoidance of doubt, if the Executive
remains employed until the beginning of a Window Period, the
Executive and the Company agree that the Executive shall resign no
later than the end of such Window Period. For purposes
of this Agreement, "Window Period" shall mean the 30-day period
immediately following elapse of one year after any Change of
Control as defined in Section 9 of this Agreement. The
Company shall inform the Executive promptly following the
occurrence of a Change of Control of the date on which the Change
of Control occurred, with such supporting detail as may be
necessary to establish such date. For purposes of this
Agreement, "Good Reason" shall mean:
(i)
the assignment to the Executive of any duties materially
inconsistent in any respect with the Executive's position
(including status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by Section 2
of this Agreement, or any other action by the Company which results
in a material diminution, in absolute terms, in such position,
authority, duties or responsibilities, excluding for this purpose
an isolated, insubstantial and inadvertent action not taken in bad
faith and which is remedied by the Company promptly after receipt
of notice thereof given by the Executive;
(ii)
any material failure by the Company to comply with any of the
provisions of this Agreement, other than an isolated, insubstantial
and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof
given by the Executive;
(iii)
any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement;
or
(iv)
any failure by the Company to comply with and satisfy the
requirements of Section 11 of this Agreement, provided that (A) the
successor described in Section 11(c) has received, at least 10 days
prior to the Date of Termination (as defined in subparagraph (e)
below), written notice from the Company or the Executive of the
requirements of such provision and (B) such failure to be in
compliance and satisfy the requirements of Section 11 shall
continue as of the Date of Termination.
Notwithstanding any
provision to the contrary, in order for any event(s) in
subparagraph (i) through (iv) above to constitute "Good Reason" for
purposes of this Agreement, (A) the Executive must notify the
Company via Notice of Termination within 90 days following the
initial occurrence of the event(s) that the Executive intends to
terminate his employment with the Company because of the occurrence
of Good Reason (which event must be described by the Executive in
reasonable detail in the Notice of Termination) and (B) within 60
days after receiving such Notice of Termination from the Executive
(the “Correction Period”), the Company must fail to
reinstate the Executive to the position he was in, or otherwise
cure the circumstances giving rise to Good
Reason. Executive’s termination for Good Reason
may occur only within 60 days following the expiration of the
Correction Period.
(d)
Notice of Termination . Any termination by the
Company for Cause, or by the Executive for Good Reason or without
any reason during a Window Period, shall be communicated by Notice
of Termination to the other party hereto given in accordance with
Section 13 of this Agreement. The failure by the Company
to set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Cause shall not waive any right
of the Company hereunder or preclude the Company from asserting
such fact or circumstance in enforcing the Company’s rights
hereunder.
(e)
Date of Termination . For purposes of this Agreement, the
term "Date of Termination" means (i) if the Executive's employment
is terminated by the Company for Cause, or by the Executive during
a Window Period or for Good Reason, the date of receipt of the
Notice of Termination or any later date specified therein, as the
case may be, (ii) if the Executive's employment is terminated by
the Company other than for Cause or Disability, the Date of
Termination shall be the date on which the Company notifies the
Executive of such termination, (iii) if the Executive's employment
is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the
Disability Effective Date, as the case may be and (iv) if the
Executive’s employment is terminated by the Executive other
than for Good Reason or during a Window Period, the date of
termination shall be the date of the receipt of the Notice of
Termination or any later date specified therein, but no later than
the end of the Window Period.
4.
Obligations of the Company upon Termination .
(a)
Disability, Good Reason or During a Window Period; Other than
for Cause or Death (except during a Window Period) . If, during
the Employment Period, (x) the Company shall terminate the
Executive's employment other than for Cause, including a
termination by reason of Disability (but not by reason of death),
or (y) the Executive shall terminate employment for Good Reason or
(z) his employment shall be terminated during a Window Period by
the Company for Cause, by the Executive during a Window Period
without any reason, or by reason of death:
(i)
the Company shall pay or provide to or in respect of the Executive
the following amounts and benefits:
A. in a lump sum in cash, within 10 days after the Date of
Termination, an amount equal to the sum of (1) the Executive's
Annual
Base Salary through the Date of Termination,
(2) any accrued but unpaid Annual Bonus for any prior fiscal year,
(3) any deferred compensation previously awarded to or earned by
the Executive (together with any accrued interest or earnings
thereon), subject to the terms and conditions of any plan or
arrangement providing such deferred compensation, and (4) any
compensation for unused vacation time for which the Executive is
eligible in accordance with the plans, policies, programs and
practices of the Company and its affiliated companies, in each case
to the extent not theretofore paid (the sum of the amounts
described in clauses (1), (2), (3), and (4) shall be hereinafter
referred to as the "Accrued Obligation");
B.
in a lump sum in cash, within 10 days after the Date of
Termination, an amount equal to the Severance Multiplier Percentage
(as defined in Exhibit A) multiplied by the Annual Base Salary
(provided that if the termination occurs after the date a Change of
Control occurs the Executive will be entitled to a lump sum cash
payment, within 10 days after the Date of Termination, in an amount
equal to the Change of Control Severance Multiplier Percentage (as
defined in Exhibit A) of Annual Base Salary);
C.
in a lump sum in cash, within 10 days after the Date of
Termination, an additional amount equal to the Supplemental
Severance Multiplier Percentage (as defined in Exhibit A) of Annual
Base Salary multiplied by a fraction, the numerator of which is the
number of days in the fiscal year through the Date of Termination
and the denominator of which is 365, provided ,
however , that if the Executive is terminated due to
Disability or after the date a Change of Control occurs, the
preceding fraction shall be deemed to be equal to 1.0; and
D.
effective as of the Date of Termination, (1) immediate vesting and
exercisability of, and termination of any restrictions on sale or
transfer (other than any such restriction arising by operation of
law) with respect to, each and every stock option, restricted stock
award, restricted stock unit award and other equity-based award and
performance award (each, a “Compensatory Award”) that
is outstanding as of a time immediately prior to the Date of
Termination and (2) unless a longer post-employment term is
provided in the applicable award agreement, the extension of the
term during which each and every Compensatory Award may be
exercised by the Executive until the earlier of (x) the first
anniversary of the Date of Termination or (y) the date upon which
the right to exercise any Compensatory Award would have expired if
the Executive had continued to be employed by the Company under the
terms of this Agreement until the latest possible date of
termination of the Employment Period in accordance with the
provisions of Section 1 hereof (the “Final Expiration
Date”).
Anything in this
Agreement to the contrary notwithstanding, if a Change of Control
occurs and if the Executive's employment with the Company is
terminated within 12 months prior to the date on which the Change
of Control occurs, and if it is reasonably demonstrated by the
Executive that such termination of employment or cessation of
service as an officer (x) was at the request of a third party who
has taken steps reasonably calculated to effect the Change of
Control or (y) otherwise arose in connection with or anticipation
of the Change of Control, then for all purposes of this Agreement,
the "date a Change of Control occurs" shall mean the date
immediately prior to the date of such termination of employment;
provided, however , that the additional Change of Control
severance will be paid within 5 days following the occurrence of
the Change of Control.
(ii)
for the period beginning on the Date of Termination and ending on
the Final Expiration Date, or such longer period as any medical or
dental plan shall provide, the Company shall continue benefits to
the Executive and/or the Executive’s family at least equal to
those which would have been provided to them in accordance with the
medical and dental plans described in Section 2(b)(iv) of this
Agreement if the Executive’s employment had not been
terminated in accordance with the medical and dental plans of the
Company and its affiliated companies, but with the Company’s
medical benefits coverages being secondary to any coverages
provided by another employer. In lieu of continued
participation in plans, practices, programs and policies described
in Section 2(b)(iv) of this Agreement (other than the medical or
dental plan, as described above), the Company shall pay the
Executive a lump sum payment equal to the Benefits Continuation
Multiplier Percentage (as defined in Exhibit A) of the
Executive’s Annual Base Salary.
(b) Death (except during a Window Period) . If the
Executive's employment is terminated by reason of the Executive's
death during the Employment Period and other than during a Window
Period in which event the provisions of Section 4(a) shall govern,
this Agreement shall terminate without further obligations to the
Executive's legal representatives under this Agreement, other than
(i) the payment of Accrued Obligations (which shall be paid to the
Executive's estate or beneficiary, as applicable, in a lump sum in
cash within 30 days of the Date of Termination), (ii) providing the
Executive with Company-paid term life insurance protection with a
death benefit at least equal to the Supplemental Life Insurance
Benefit (as defined in Exhibit A) multiplied by the
Executive’s Annual Base Salary, with such coverage being
supplemental to any other Company-paid group life insurance policy,
(iii) during the period beginning on the Date of Termination and
ending on the first anniversary thereof medical and dental benefits
coverage for the Executive’s dependents determined as if the
Executive's employment had not terminated by reason of death, and
(iv) effective as of the Date of Termination, (A) immediate vesting
and exercisability of, and termination of any restrictions on sale
or transfer (other than any such restriction arising by operation
of law) with respect to, each and every Compensatory Award
outstanding as of the time immediately prior to the Date of
Termination, (B) the extension of the term during which each and
every Compensatory Award may be exercised or purchased by the
Executive until the earlier of (1) the first anniversary of the
Date of Termination or (2) the date upon which the right to
exercise or purchase any
Compensatory Award
would have expired if the Executive had continued to be employed by
the Company under the terms of this Agreement until the Final
Expiration Date.
(c)
Cause; Other than for Disability, Good Reason or During a Window
Period . If the Executive's employment shall be terminated for
Cause during the Employment Period and other than during a Window
Period, in which event the provisions of Section 4(a) shall govern,
this Agreement shall terminate without further obligations to the
Executive other than for Accrued Obligations. If the Executive
terminates employment during the Employment Period, excluding a
termination for any Disability, Good Reason or without any reason
during a Window Period, in which event the provisions of Section
4(a) shall govern, this Agreement shall terminate without further
obligations to the Executive, other than for the payment of Accrued
Obligations. In such case, all Accrued Obligations shall be paid to
the Executive in a lump sum in cash within 30 days of the Date of
Termination.
5.
Non-exclusivity of Rights . Except as provided in
Section 4 of this Agreement, nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation
in any plan, program, policy or practice provided by the Company or
any of its affiliated companies and for which the Executive may
qualify, nor shall anything herein limit or otherwise affect such
rights as the Executive may have under any contract or agreement
with the Company or any of its affiliated companies. Amounts which
are vested benefits or which the Executive is otherwise entitled to
receive under any plan, policy, practice or program of or any
contract or agreement with the Company or any of its affiliated
companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program
or contract or agreement except as such plan, policy, practice or
program is superseded by this Agreement.
6.
Full Settlement; Resolution of Disputes .
(a) The Company's obligation to make payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall
not be affected by any setoff, counterclaim, recoupment, defense,
mitigation or other claim, right or action which the Company may
have against the Executive or others. In the event (i)
prior to a Change of Control, the Executive's employment is
terminated for any reason other than Executive's voluntary
termination (with or without Good Reason), or (ii) within two years
after a Change of Control, the Executive's employment is terminated
by the Company or the Executive for any reason, the Company agrees
to pay promptly as incurred, to the full extent permitted by law,
all legal fees and expenses which the Executive may reasonably
incur as a result of any arbitration pursuant to Section 6(b)
(regardless of the outcome thereof) initiated by the Company, the
Executive or others regarding the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee
of performance thereof (including as a result of any contest by the
Executive about the amount of any such payment pursuant to this
Agreement), plus in each case interest on any delayed payment at
the annual percentage rate which is three percentage points above
the interest rate shown as the Prime Rate in the Money Rates column
in the then most recently published edition of The Wall Street
Journal (Southwest Edition), or, if such rate is not then so
published on at least a weekly basis, the interest rate announced
by Wells Fargo & Company (or
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