Exhibit 10.2
Execution Copy
EMPLOYMENT AGREEMENT
This AGREEMENT (the “Agreement”) by and between Carrizo
Oil & Gas, Inc., a Texas corporation (the
“Company”), and S. P. Johnson, IV (the
“Executive”), to be effective as of June 5, 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 .
(i)
During the Employment Period, (A) the Executive’s position
(including status, offices, titles and reporting requirements),
authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant of
those held, exercised and assigned on the Agreement Effective Date,
which shall in any event include status as President, Chief
Executive Officer and member of the Board, and (B) the
Executive’s services shall be performed within the Houston,
Texas metropolitan area.
(ii) During the Employment Period, and 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. It is expressly
understood and agreed that to the extent that any such activities
have been conducted by the Executive prior to the Agreement
Effective Date, the continued conduct of such activities (or the
conduct of activities similar in nature and scope thereto)
subsequent to the Agreement Effective Date shall not thereafter be
deemed to interfere with the performance of the Executive’s
responsibilities to the Company.
(i)
Base Salary . During the Employment Period, the
Executive shall receive an annual base salary equal to the base
salary in effect immediately prior to the Agreement Effective Date
(“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. Annual
Base Salary shall not be reduced after any such increase and the
term “Annual Base Salary,” as utilized in this
Agreement, shall refer to Annual Base Salary as so
increased. 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 executives of the Company and its affiliated companies, but
in no event shall such plans provide the Executive with
incentive
opportunities
(measured with respect to both regular and special incentive
opportunities, to the extent, if any, that such distinction is
applicable), savings opportunities and retirement benefit
opportunities that are, in each case, less favorable to the
Executive, in the aggregate, than the most favorable plans of the
Company and its affiliated companies. As used in this
Agreement, the term “most favorable” shall, when used
with reference to any plans, practices, policies or programs of the
Company and its affiliated companies, be deemed to refer to the
plans, practices, policies or programs of the Company and its
affiliated companies, as in effect at any time during the
Employment Period and provided generally to other executives of the
Company or its affiliated companies, which are most favorable to
the Executive.
(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 executives of the Company or its affiliated companies, but in
no event shall such plans, practices, policies and programs provide
the Executive with benefits that are less favorable, in the
aggregate, than the most favorable such plans, practices, policies
and programs 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 most favorable policies, practices and procedures of the
Company and its affiliated companies.
(vi)
Fringe Benefits and Perquisites . During the
Employment Period, the Executive shall be entitled to fringe
benefits and perquisites in accordance with the most favorable
plans, practices, programs and policies of the Company and its
affiliated companies applicable to similarly situated
executives.
(vii)
Office and Support Staff . During the Employment
Period, the Executive shall be entitled to an office or offices of
a size and with furnishings and other appointments, and to
secretarial and other assistance to the extent needed to fulfill
his corporate responsibilities, at least equal to the most
favorable of the foregoing provided to the Executive by the Company
and its affiliated companies at any time during the Employment
Period.
(vii)
Vacation . During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with the
most favorable 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 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 material breach by the Executive of a
material fiduciary duty owed to the Company; (iii) a material
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 material 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)
the Company’s requiring the Executive to be based at any
office outside the Houston metropolitan area;
(iv)
any purported termination by the Company of the Executive’s
employment otherwise than as expressly permitted by this
Agreement;
(v)
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; or
(vi)
any failure to reelect Executive as a member of the Board.
Notwithstanding any provision to the contrary,
in order for any event(s) in subparagraph (i) through (vi) 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(d) 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 most favorable 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 of
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
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