At the Annual Meeting, shareholders will vote on the matters outlined in the Notice of Annual Meeting, including the election of directors, an advisory vote to approve the compensation of our Named Executive Officers (defined in “Executive Compensation—Compensation Discussion and Analysis” below), an amendment and restatement of the 2017 Incentive Plan of Carrizo Oil & Gas, Inc. (the “2017 Incentive Plan”) to increase the shares authorized for issuance and make other

changes, the ratification of the appointment of Ernst & Young LLP (“EY”) as our independent registered public accounting firm, and such other business that may properly come before the Annual Meeting or any adjournment(s) or postponement(s) thereof. As of the date of this proxy statement, the Board of Directors is not aware of any other matters to be acted upon at the Annual Meeting. Management and representatives of EY will be available to respond to questions from shareholders.

A proxy statement is a document that the United States Securities and Exchange Commission (“SEC”) requires that we make available to you when we are soliciting your vote. This proxy statement describes matters

on which we would like you, as a shareholder, to vote and provides you with information on these matters so that you can make an informed decision.

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.

Shareholders of record of the issued and outstanding shares of common stock, par value $0.01 per share, of the Company on the record date may vote on all matters at the Annual Meeting. Each share of common stock is

entitled to one vote on each proposal submitted to a vote of shareholders. The record date for the Annual Meeting, which is fixed by the Board of Directors in accordance with Texas law, is March 20, 2019.

Holders of the 8.875% redeemable preferred stock, par value $0.01 per share (the “Preferred Stock”), have voting rights only in specified circumstances. Such rights are not currently exercisable. See “Other Items—Certain Information Regarding Preferred Stock and Common Stock Warrants”.

As of March 20, 2019, the Company had 92,496,569 shares of common stock and 200,000 shares of Preferred Stock issued and outstanding. No other class of stock is outstanding.

In order to transact business at the Annual Meeting, we must have a quorum. This means at least a majority of the shares entitled to vote must be represented at the Annual Meeting,

either by proxy or in person. Abstentions and broker non-votes will be counted for purposes of determining whether there is a quorum at the Annual Meeting.

Shareholder of Record. If your shares are registered directly in your name with EQ Shareowner Services, formerly Wells Fargo Shareowner Services, the Company’s stock transfer agent, you are considered the “shareholder of record” 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, follow the voting directions provided by your broker or other nominee.

By Written Proxy. If you are a shareholder of record, you can vote by written proxy card. If you hold your shares in street name, your broker or other nominee will 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.

By Telephone or Internet. If you are a shareholder of record, you can also vote by telephone from the U.S. using the toll-free telephone number on the proxy card, or by Internet, using the procedures and instructions described on the proxy card or you can give a proxy to be voted by telephone or by Internet. If you hold your shares in street name, you may vote by telephone or Internet if your broker or

other nominee makes those methods available, in which case the broker or other nominee will include the instructions with the proxy materials.

In Person. 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. Even if you currently plan to attend the Annual Meeting, we recommend that you also submit your proxy so that your vote will be counted if you later decide not to attend the Annual Meeting. If you hold your shares in street name, 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.

An abstention occurs when the beneficial owner of shares, or a broker or other nominee holding shares for a beneficial owner, is present, in person or by proxy, and entitled to vote at the meeting, but such person refrains from voting as to a particular 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 holder 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 has no 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.

Proposal 1. The Board of Directors recommends that shareholders vote FOR the election of the eight nominees for director.

Proposal 2. The Board of Directors recommends that shareholders vote FOR the approval, on an advisory basis, of the compensation of the Company’s Named Executive Officers.

Proposal 3. The Board of Directors recommends that shareholders vote FOR the

approval of an amendment and restatement of the 2017 Incentive Plan to increase the shares authorized for issuance and make other changes.

Proposal 4. The Board of Directors recommends that shareholders vote FOR the ratification of the appointment of EY as the Company’s independent registered public accounting firm for the year ending December 31, 2019.

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, a majority of votes cast means the number of votes cast FOR the election of a director nominee exceeds the number of votes cast AGAINST such nominee. Abstentions and broker non-votes will have no effect on Proposal 1. See “Corporate Governance and Board Matters—Majority Vote in Uncontested 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 the matter is required to approve, on an advisory basis, the compensation of the Company’s Named Executive Officers. Abstentions will be counted as votes AGAINST Proposal 2. Broker non-votes will have no effect on Proposal 2.

Proposal 3. The affirmative vote of the holders of a majority of total votes cast on the matter is required to approve an amendment and restatement of the 2017 Incentive Plan to increase the shares authorized for issuance and make other changes. Abstentions will be counted as votes AGAINST Proposal 3. Broker non-votes will have no effect on Proposal 3.

Proposal 4. The affirmative vote of the holders of a majority of the shares entitled to vote on the matter is required to approve the ratification of the Company’s independent registered public accounting firm. Abstentions will be

counted as votes AGAINST Proposal 4. Brokers will have discretionary authority to vote on Proposal 4 and accordingly there will be no broker non-votes for this proposal.

If you are a shareholder of record, you may revoke your initial proxy vote before it is voted at the Annual Meeting by:

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.

If you provide us your signed proxy but do not specify how to vote, we will vote your shares as follows:

Proposal 1. FOR the election of each director nominee;

Proposal 2. FOR the approval, on an advisory basis, of the compensation of the Company’s Named Executive Officers;

Proposal 3. FOR the approval of an amendment and restatement of the 2017 Incentive Plan to increase the shares authorized for issuance and make other changes;

Proposal 4. FOR the ratification of the appointment of EY as the Company’s independent registered public accounting firm for the year ending December 31, 2019; and

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. However, for any other business that may come before the Annual Meeting, voting will be at the discretion of the persons named in the proxy.

The preliminary voting results will be announced at the Annual Meeting. The final voting results will be published within four

business days following the Annual Meeting, via a Form 8-K filed with the SEC and available at www.sec.gov.

The Board of Directors believes our Company’s current leadership structure, with Mr. S.P. Johnson IV serving as Chief Executive Officer and Mr. Steven A. Webster serving as Chairman of the Board, 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. We believe our Chief Executive Officer and our Chairman have an excellent working relationship. We believe this relationship and the separation of these positions 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.

According to our bylaws, the responsibilities of the Lead Independent Director include coordinating and moderating executive sessions of the Board of Director’s independent directors and serving 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 or a committee of the Board of

Directors and has the authority to call meetings of independent directors.

In affirmatively determining whether a Director is “independent,” the Board reviews NASDAQ listing standards, which set forth certain circumstances under which a director may not be considered independent. Mr. S.P. Johnson IV, the Company’s President and CEO, is not independent under such standards. Audit Committee and Compensation Committee members are subject to additional, more stringent independence requirements.

The Board has reviewed the business and charitable relationships between the Company and each non-employee Director (“Non-Employee Director”) to determine compliance with the NASDAQ listing standards and to evaluate whether there are any other facts or circumstances that might impair a Non-Employee Director’s independence. The Board has affirmatively determined that each of the Non-Employee Directors, which include Mr. Steven A. Webster, Mr. F. Gardner Parker,

Ms. Frances Aldrich Sevilla-Sacasa, Mr. Thomas L. Carter, Jr., Mr. Robert F. Fulton, Mr. Roger A. Ramsey and Mr. Frank A. Wojtek are independent under NASDAQ Listing Rule 5605, the Exchange Act, and the applicable charter of any committee on which they serve. In making this determination, including as described in “Other Items—Related Party Transactions”, the Board took into account the prior relationship between the Company and entities related to Avista Capital Holdings, LP and transactions between the Company and affiliates of Black Stone Minerals, L.P. The Board determined that this prior relationship and these transactions did not interfere with the exercise of Mr. Webster’s and Mr. Carter’s independent judgment in carrying out the responsibilities of a director of the Company and therefore did not preclude a determination that Mr. Webster and Mr. Carter are independent.

Directors are expected to attend Board meetings and the Annual Meeting of Shareholders. During 2018, the Board of Directors held five meetings and transacted business on nine occasions by unanimous written consent. During 2018, each Director attended at least 75% of the meetings of the Board during the period in which they were a Director. All of the Company’s Directors attended the 2018 Annual Meeting of Shareholders.

Non-Employee Directors ordinarily meet in executive session without management present at most regularly scheduled Board meetings and may meet at other times at the discretion of Chairman of the Board, the Lead Independent Director, a majority of the Board of Directors, any committee of the Board of Directors, or the entire Board of the Directors.

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—Governance.”

The Board has determined that all of the members of the Audit Committee satisfy the independence standards under the NASDAQ listing standards and Rule 10A-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In addition, the Board has determined that each member of the Audit Committee 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. A description of the background and qualifications of each member of the Audit Committee is described below under “Proposal 1. Election of Directors.”

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 is composed entirely of independent 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 Charter.

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 an analysis of competitive

market data and recommendations regarding our executive and director compensation programs.

The Compensation Committee has been appointed by the Board of Directors to administer the 2017 Incentive Plan, the Incentive Plan of Carrizo Oil & Gas, Inc., as amended and restated effective May 15, 2014 (the “Prior Incentive Plan”), and the Carrizo Oil & Gas, Inc. Cash-Settled Stock Appreciation Rights Plan (the “Cash SAR Plan”). 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 Non-Employee Directors, shares of restricted stock, restricted stock units (“RSUs”), options and stock appreciation rights (“SARs”) under the 2017 Incentive Plan, Prior Incentive Plan and the Cash SAR Plan, up to an aggregate grant date or modification date fair value not to exceed $250,000 per individual. A copy of the Compensation Committee Charter may be found on our website at www.carrizo.com under “About—Governance.”

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 to the Code of Ethics and Business Conduct. A copy of the Nominating and Corporate Governance Committee Charter may be found on our website at www.carrizo.com under “About—Governance.”

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, sustainability 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 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, our internal auditors and our independent registered public accounting firm. 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.

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 a contested election of directors, a “plurality of the votes cast” means that the nominees receiving the greatest number of shares voted “for” would be elected and in an uncontested election of directors, a “majority of votes cast” means 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.

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 and Non-Employee 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 must be approved by the Board and 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—Governance.”

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. Employees can confidentially communicate illegal and unethical activities, including concerns or complaints regarding the matters noted above, by calling an independently operated hotline at 1-844-527-0537 or visiting http://cerl.ethicspoint.com.

The members of the Compensation Committee during 2018 were Messrs. Fulton, Parker and Ramsey. There are no matters relating to

interlocks or insider participation that we are required to report.

In assessing the qualifications of candidates for director, the Nominating and Corporate Governance Committee considers, in addition to qualifications set forth in the Company’s bylaws, each potential nominee’s personal and professional integrity, experience, reputation, skills, ability and willingness to devote the time and effort necessary to be an effective board member, and commitment to acting in the best interests of the Company and its shareholders. The Nominating and Corporate Governance Committee also considers requirements under the listing standards of the NASDAQ Stock Market, as well as qualifications applicable to membership on Board committees under the listing standards and various regulations. The Nominating and Corporate Governance Committee makes recommendations to the Board, which in turn makes the nominations for consideration by the shareholders.

Suggestions for potential nominees for director can come to the Nominating and Corporate Governance Committee from a number of sources, including incumbent directors, executive officers, executive search firms, and others. The extent to which the Nominating and Corporate Governance Committee dedicates time and resources to the consideration and evaluation of any potential nominee brought to its attention depends on the information available to the Nominating and Corporate Governance Committee about the qualifications and suitability of the potential nominee, viewed in light of the needs of the Board of Directors, and is at the Nominating and Corporate Governance Committee’s discretion. Recognizing the contribution of incumbent directors who have been able to

develop, over a period of time, increasing insight into the Company and its operations and, therefore, provide an increasing contribution to the Board as a whole, the Nominating and Corporate Governance Committee reviews each incumbent director’s qualifications to continue on the Board in connection with the selection of nominees to take office when that director’s term expires, and conducts a more detailed review of each director’s suitability to continue on the Board following expiration of the director’s term.

In addition, the Nominating and Corporate Governance Committee’s policy is that it will consider candidates for the Board recommended by shareholders. Any such recommendation should be submitted in writing to the Corporate Secretary, Carrizo Oil & Gas, Inc., 500 Dallas Street, Suite 2300, Houston, Texas 77002, and should include, among other things:

Although the Nominating and Corporate Governance Committee will consider candidates recommended by shareholders, it may determine not to recommend that the Board, or the Board may determine not to, nominate those candidates for election to the Board of Directors.

Our 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 or by a shareholder, an incumbent director nominee will agree that if such incumbent director nominee fails to receive the required vote for election to the Board 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 an irrevocable letter of resignation that would be effective upon, and only in the event that the Board accepts, such resignation.

The Nominating and Corporate Governance Committee considers diversity in identifying nominees for director and endeavors to have a Board representing diverse experience in areas that will contribute to the Board’s ability to perform its roles relating to oversight of the Company’s business, strategy and risk exposure. For example, the Nominating and Corporate Governance Committee takes into account, among other things, the diversity of business, leadership, and personal experience of Board candidates and determines how that experience will serve the best interests of the Company. In 2018, the Nominating and Corporate Governance Committee recommended, the Board appointed, and the shareholders subsequently elected, Ms. Aldrich Sevilla-Sacasa as a director, furthering the diversification and refreshment of our Board.

The Board of Directors has nominated for election as directors at the Annual Meeting the eight nominees named below. If elected, each nominee will serve until the 2020 Annual Meeting of Shareholders or until their successors are elected and qualified or until the earlier of their resignation, removal, or death.

The Board of Directors has no reason to believe that any nominee for election as a director will not be a candidate or will be unable to serve, but if for any reason one or more of these nominees is unavailable as a candidate or unable to serve when election occurs, the

persons designated as proxies on the enclosed proxy card, in the absence of contrary instructions by shareholders, will in their discretion vote the proxies for the election of any of the other nominees or for a substitute nominee or nominees, if any, selected by the Board of Directors.

Each nominee brings a strong and unique background and set of skills to the Board of Directors, giving the Board of Directors as a whole, competence and experience in a wide variety of areas, including corporate governance and board service, executive management, corporate finance and financial

markets, investment, the oil and gas industry, and civic leadership. Information regarding the business experience and qualifications of each

nominee is provided below. All nominees are currently serving as directors and are standing for election by the shareholders.

The Company’s Non-Employee Director compensation, which is reviewed annually by the Compensation Committee and approved by the Board consists of a combination of cash and equity-based compensation designed to attract and retain qualified individuals to serve on the Board and align the interests of directors with those of our shareholders. In determining the level of Non-Employee Director compensation, the Compensation Committee considers the significant amount of time directors spend fulfilling their duties as well as the competitive market for skilled directors. The annual service period for our directors is the period from one shareholders meeting to the next with cash compensation paid in quarterly installments and equity awards granted upon joining the Board and after their election by shareholders at each annual shareholder meeting. The Company also reimburses travel, meal, and lodging expenses incurred by our Non-Employee Directors to attend Board and

committee meetings and to participate in director education programs. Mr. Johnson, our President and Chief Executive Officer, does not receive additional compensation for serving on the Board as an employee director.

The Compensation Committee engages Pearl Meyer & Partners, LLC (“Pearl Meyer”) as its independent compensation consultant to annually review Non-Employee Director compensation based on an analysis of the compensation paid to the non-employee directors of companies included in the same compensation peer group used to annually review executive compensation.

After considering Pearl Meyer’s 2018 review of Non-Employee Director compensation, in March 2018, the Compensation Committee recommended the following Non-Employee Director compensation for the 2018-2019 director term, which was approved by the Board in May 2018.

The number of RSUs granted to Non-Employee Directors is based on the annual equity retainers shown in the table

above, divided by the closing stock price of our common stock on the NASDAQ Global Select Market on the grant date. See “2018 Director

Compensation” table below for details of the RSUs granted to the Non-Employee Directors during 2018.

After considering Pearl Meyer’s 2019 review of Non-Employee Director compensation, in February 2019, the Compensation Committee

recommended the Non-Employee Director compensation for the 2019-2020 director term, remain the same as the Non-Employee Director compensation for the 2018-2019 director term presented above.

Non-Employee Directors must own shares equal to three times their annual cash retainer for Board membership. Upon appointment as a Non-Employee Director, the individual has a five-year period in which to comply with the

stock ownership guidelines. As of March 20, 2019, all Non-Employee Directors were in compliance with the stock ownership guidelines.

Brad Fisher has served as Vice President and Chief Operating Officer since March 2005. Prior to that time, he served as Vice President of Operations since July 2000 and General Manager of Operations from April 1998 to June 2000. Prior to joining us, Mr. Fisher spent 14 years with Cody Energy and its predecessor Ultramar Oil & Gas Limited where he held various managerial and technical positions, last serving as Senior Vice President of Engineering and Operations. Mr. Fisher holds a B.S. degree in Petroleum Engineering from Texas A&M University.

David L. Pitts has served as Vice President and Chief Financial Officer since August 2014. Mr. Pitts also served as Treasurer from August 2014 to March 2015 and Vice President and Chief Accounting Officer from January 2010 to September 2014. Prior to joining us, he served as an audit partner with Ernst & Young LLP. Prior to his employment at Ernst & Young LLP from 2002 to 2009, Mr. Pitts was a senior manager with Arthur Andersen. Mr. Pitts is a CPA and holds a B.S. in Accounting and Business from Southwest Baptist University.

Gerald A. Morton has served as General Counsel and Vice President of Business Development since 2008. Prior to joining us, Mr. Morton spent 15 years with Pogo Producing Company, where he held various positions including Vice President – Law, Corporate Secretary, and Senior Vice

President for Asia and Pacific Operations. Mr. Morton began his oil and gas industry career in 1982 working for Texaco as a geophysicist. Mr. Morton graduated from Brigham Young University with an Engineering Geology degree. He received his MBA in Finance in 1985 and a law degree in 1988, both from the University of Houston.

Richard H. Smith has served as Vice President of Land since August 2006. Prior to joining us, Mr. Smith held the position of Vice President of Land for Petrohawk Energy Corporation from March 2004 through August 2006. Mr. Smith served with Unocal Corporation from April 2001 until March 2004 where he held the position of Land Manager – Gulf Region USA with areas of concentration in the Outer Continental Shelf, Onshore Texas and Louisiana, and Louisiana State Waters. From September 1997 until March 2001, Mr. Smith held the position of Land Manager – Gulf Coast Region with Basin Exploration, Inc. Mr. Smith held various land management positions with Sonat Exploration Company, Michel T. Halbouty Energy Co., Pend Oreille Oil & Gas Company, and Norcen Explorer, Inc. from the time he began his career in 1980 until the time he joined Basin Exploration. Mr. Smith is a Certified Professional Landman with a B.B.A. in Petroleum Land Management from the University of Texas at Austin.

Gregory F. Conaway has served as Vice President and Chief Accounting Officer since September 2014. Mr. Conaway joined the Company in July 2011 serving as Assistant Controller — Financial Reporting and served as Controller — Financial Reporting from May 2012 to September 2014. Prior to joining us,

Mr. Conaway worked for Ernst & Young LLP, holding positions of increasing responsibility including senior manager. Mr. Conaway began his career with Arthur Andersen in 1998. Mr. Conaway is a CPA and holds a M.B.A. and B.B.A. in Accounting from Angelo State University.

The Compensation Committee oversees our compensation programs. Our compensation programs are designed to specifically address our desire to motivate and retain all of our employees.

Our executive compensation program is focused on tying a substantial portion of our Named Executive Officers total compensation to the Company’s performance in order to incentivize them to consistently build long-term shareholder value and to align the interests of our executives with those of our shareholders. The following Compensation Discussion and

Analysis explains how the Compensation Committee has structured our executive compensation program to achieve these objectives.

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.

During 2018, we executed on the plan that we began in 2017 to streamline our portfolio and focus on our highest-return plays in the Eagle Ford and Delaware Basin by continuing to build our Delaware Basin position through the acquisition of approximately 10,000 net bolt-on acres and divesting non-core operations in the

Niobrara as well as a portion of our assets in the Eagle Ford.

The following graph compares the cumulative total shareholder return (“TSR”) of our common stock over the five-year period ended December 31, 2018 with the cumulative TSR for the same period for the Standard and Poor’s 500 (“S&P 500”) Index, the Dow Jones U.S. Exploration and Production (“DJ U.S. E&P”) Index, our 2018 Compensation Peer Group, and our 2018 Stock Performance Peer Group.

The cumulative TSR assumes that $100 was invested, including reinvestment of dividends, if any, in our common stock on December 31, 2013, and in each of the S&P 500 and DJ U.S. E&P indexes and in each of the 2018 Compensation and Stock Performance Peer Groups on the same date. The results shown in the graph below are not necessarily indicative of future performance.

The DJ U.S. E&P Index is a weighted composite of 64 companies in the oil and gas exploration and production industry. See “Section 2—Executive Compensation Program Objectives—Compensation Should be Benchmarked” for a listing of the companies

included in our 2018 Compensation Peer Group and “Section 3—Executive Compensation Components—Long-Term Equity-Based Incentive Awards” for a listing of the companies included in our 2018 Stock Performance Peer Group.

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 weight a significant portion our executive total compensation towards at-risk, variable compensation.

The most significant component of our CEO’s variable, at-risk compensation is long-term equity-based incentive awards which consist of RSUs, Cash SARs, and performance shares. Our CEO’s realizable compensation varies significantly based on changes in the Company’s

share price. Realizable compensation is not a substitute for targeted compensation in evaluating our executive compensation, but we believe it is important to understand the impact the Company’s share price performance has on our CEO’s realizable compensation.

Our CEO’s realizable compensation is 51%, 49%, and 70% of target compensation for 2016, 2017, and 2018, respectively, primarily due to declines in the Company’s share price

and demonstrates the significant impact our Company’s share price performance has on our CEO’s realizable compensation.

At our 2018 Annual Meeting of Shareholders, holders of 94.1% of the shares entitled to vote on the matter voted in favor of the compensation of the Named Executive Officers as described in our 2018 proxy statement. The Compensation Committee interpreted this strong level of shareholder support as affirmation of the elements and objectives of the Company’s executive compensation program. Although the Compensation Committee viewed the results of this advisory vote as an indication from shareholders that no change to our executive compensation program was necessary, the Compensation

Committee also considered information provided by its independent compensation consultant, including compensation decisions made by the compensation committees of companies included in our 2018 compensation peer group, when determining whether changes to our executive compensation program were necessary in 2019. The Compensation Committee will continue to consider the results of the annual shareholder advisory vote on executive compensation when making future executive compensation decisions.

Provide competitive total compensation opportunities that allow us to attract, retain, reward, and motivate talented management. We evaluate the range of current industry compensation practices to provide external benchmarks that help to guide our executive compensation structure. Unless circumstances warrant otherwise, we generally target executive total direct compensation near the market median of executives in equivalent positions at comparable companies, considering individual performance, responsibilities, experience, leadership, and contributions as well as the Company’s financial, operational, and share price performance.

Support a performance-based culture. Our executive compensation program is intended to provide the appropriate balance between fixed and variable compensation, cash and equity-based compensation, and short-term and long-term incentives with the majority of each executive’s total compensation “at-risk” or variable based on a combination of attainment of

short-term goals in support of our Company’s long-term strategy and long-term stock performance both on an absolute basis and relative to our peer companies. Our program is structured to require a commitment to performance because total compensation at the market is not guaranteed. Therefore, our program is designed to reward above-target compensation when performance is warranted and below-target compensation when performance does not meet expectations.

Align our executives’ interests with those of our shareholders. We believe that we achieve alignment of executives’ and shareholders’ interests by providing a substantial portion of total compensation in the form of long-term equity-based incentives that tie executive pay to stock price performance and through stock ownership guidelines that ensure our executives have a meaningful ownership stake in the Company.

Encourage appropriate risk management. We believe that effective leadership requires taking prudent business risks while

discouraging excessive risk-taking. To encourage this balance, we have structured our compensation programs to include approximate three-year vesting schedules on long-term equity-based incentive awards and an annual incentive bonus using a combination of short-term financial and operational

objectives. We also mitigate risk by exercising discretion in determining the payout of annual incentive bonuses rather than relying solely on a formula. We regularly review our compensation programs to ensure that our executives are not encouraged to take inappropriate or excessive risks.

The Compensation Committee oversees the Company’s compensation programs, administers the 2017 Incentive Plan, the Prior Incentive Plan, and the Cash SAR Plan, and reviews and approves all compensation decisions relating to our executives. The Compensation Committee is authorized by the Board of Directors and the Compensation

Committee 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.

Pearl Meyer serves as independent compensation consultant for and reports directly to the Compensation Committee. Representatives of Pearl Meyer attend Compensation Committee meetings, as requested, and communicate with the Compensation Committee informally between meetings as necessary. Pearl Meyer assists and advises the Compensation Committee on all aspects of our executive compensation program. Services provided by the independent compensation consultant include:

To facilitate the delivery of these services to the Compensation Committee, Pearl Meyer interfaces with our management, particularly our CFO and our Vice President of Human Resources. In 2018, Pearl Meyer did not provide any services to the Company other than those requested by the Compensation Committee and related to Pearl Meyer’s engagement as the independent compensation consultant to the Compensation Committee.

Other than those services requested by the Compensation Committee, Pearl Meyer did not have any business or personal relationships with members of the Compensation Committee or executives of the Company, did not own any of the Company’s common stock and maintained policies and procedures designed to avoid such conflicts of interest. As such, the Compensation Committee determined the engagement of Pearl Meyer in 2018 did not create any conflicts of interest.

The Compensation Committee engages Pearl Meyer to annually review the compensation peer group used for executive compensation decisions. Pearl Meyer’s process considers the

prior year compensation peer group as the starting point, and expands the pool of potential peers by reviewing peers of peers, peers identified by proxy advisory firms and other

peers identified from analyst reports and independent research. Pearl Meyer refines its list of potential peers using criteria such as industry focus, corporate structure, operational similarity and financial size with a focus on identifying a peer group of 15-20 domestic independent exploration and production companies with operations in either or both of the Company’s two basins and where the Company is within a reasonable range of the peer group median for revenues and/or market capitalization with final peer group selections made after considering input from management. The resulting compensation peer group, along with any changes in the composition of the peer group, is reviewed and approved by the Compensation Committee.

The compensation peer groups used for executive compensation decisions in 2017, 2018 and 2019 are presented in the table

below. From 2017 to 2018, five companies were removed due to a lack of operational similarity as a result of the Company’s sale of its Utica, Marcellus, and Niobrara assets. In order to maintain an appropriately sized peer group, six companies were added that met the operational similarity, financial size and other criteria discussed above. From 2018 to 2019, two companies were removed as they no longer met the financial size criteria discussed above and in order to maintain an appropriately sized peer group, one company was added that met the operational similarity, financial size and other criteria discussed above. A separate peer group is used in connection with our performance share awards as described below under “Executive Compensation Components—Long-Term Equity-Based Incentive Awards—Performance Shares.”

The Compensation Committee considers the results of Pearl Meyer’s executive compensation review to ensure that compensation decisions are appropriate, reasonable and consistent with the Company’s compensation program objectives and competitive with executive compensation of companies against which we compete for business opportunities, investment dollars, and executive talent. To maintain independence and objectivity, the input and interpretation of data sources, methodology of consolidating data, and marketplace statistics included in Pearl Meyer’s executive compensation review

were compiled without any input from management except for explanations of position functions.

The market-based compensation data included in Pearl Meyer’s executive compensation review is based on compensation peer group proxy compensation data and published industry compensation survey data. Proxy data is generally favored over survey data with the weighting based on the number of position matches available in the compensation peer group. Pearl Meyer’s 2018 executive compensation review was based on the following weighting:

The charts below show the 2018 targeted total direct compensation mix of our Chief Executive Officer and other Named Executive Officers. As the charts illustrate, 88% and 83% of targeted total compensation for our Chief Executive

Officer and other Named Executive Officers, respectively, is attributable to the performance-based annual incentive bonus and long-term equity-based incentive awards, and thus is variable and tied to performance (i.e. “at-risk”).

Base salary is intended to provide a foundation of executive compensation that recognizes the level of responsibility and authority of each individual executive and compensates the individual executive for day to day contributions to our success. Unless circumstances warrant otherwise, we generally target base salaries near the 50th percentile of executives in equivalent positions at comparable companies.

After considering the recommendations of our CEO for adjustments to base salaries for executives other than himself and competitive market data provided by its independent compensation consultant, in March 2018, the Compensation Committee approved the 2018 base salaries of the Named Executive Officers as set forth below. Changes in base salaries are generally effective April 1 of each year.

Executives are eligible for an annual incentive bonus which 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 long-term shareholder value by improving financial strength, managing costs, and investing in projects that will deliver future value. We employ balanced financial and operational performance metrics to further specific objectives of our strategy, such as crude oil production, cost management, and capital efficiency.

Annual incentive bonus targets, expressed as a percentage of base salary, are established for each executive. Each executive’s annual

incentive bonus payout opportunity ranges from zero to 200% of target based on the Company’s actual results relative to performance metric targets. Actual annual incentive bonuses paid could be more or less than the calculated payout as determined by the Compensation Committee in its discretion.

After considering the recommendations of our CEO for adjustments to annual incentive bonus targets for executives other than himself and competitive market data provided by Pearl Meyer, in March 2018, the Compensation Committee approved the 2018 annual incentive bonus targets of the Named Executive Officers as set forth below, which remained unchanged from 2017:

Each year, the Compensation Committee approves the annual incentive bonus performance metrics, weighting factors, and targets after considering input from its independent compensation consultant, including a review of the annual incentive bonus performance metrics used by companies included in our compensation peer group.

The table below sets forth the performance metrics, weighting factors, and targets for executives’ 2018 annual incentive bonus, which were approved by the Compensation Committee in March 2018, along with the Company’s 2018 actual results and payout levels achieved. The performance metric targets were based on the Company’s 2018 corporate plan and consistent with the Company’s 2018 annual guidance included in its February 26, 2018 press release. The 2018 performance metrics and targets set forth below are also consistent with those established for non-executive employees’ 2018

annual incentive bonus (other than cash G&A, which is not a performance metric for non-executive employees).

Our 2018 target for cash G&A was $53.5 million, 35% higher than the 2017 actual cash G&A of $39.7 million. This is primarily due to excluding annual bonuses from our 2017 target for cash G&A (and therefore also excluding annual bonuses from the 2017 actual results) as well as the impact of the Company’s August 2017 acquisition of properties in the Delaware Basin. This acquisition and associated increase in drilling and completion activity resulted in an increase in employee headcount in late 2017 and an additional increase in employee headcount was expected for 2018.

Our 2018 target for lease operating expense was $7.88/Boe, approximately 8% higher than the 2017 actual lease operating expense of $7.30/Boe. This is primarily due to processing fees for certain of our natural gas and NGL

processing contracts that, effective January 1, 2018, were presented in lease operating expense as a result of the adoption of Accounting Standards Codification 606 – Revenue from Contracts with Customers as well as an increased proportion of total production from crude oil properties, which have a higher operating cost per Boe than natural gas properties, as a result of the divestiture of our assets in Marcellus in the fourth quarter of 2017.

Our initial 2018 target for drill-bit finding and development cost was revised from a threshold of $12.00/Boe, target of $11.00/Boe, and maximum of $9.50/Boe to those presented in the table below as a result of our mid-2018 shift in capital from the Delaware Basin to the Eagle Ford, which carries higher drill-bit finding and development costs. The Compensation Committee approved these revisions since this shift in capital was not contemplated when they approved our initial 2018 target.

Despite 2018 actual results achieving 109% of targeted performance, considering the Company’s recent share price performance, management recommended, and the Compensation Committee approved, the exercise of negative discretion to reduce the

payout to 106% of target, which corresponded to the payout level for non-executive employees. The actual 2018 annual incentive bonuses, which were paid to Named Executive Officers in March 2019, along with the 2018 annual incentive bonus targets, are set forth below:

The table below sets forth the performance metrics, weighting factors, and targets for executives’ 2019 annual incentive bonus, which were approved by the Compensation Committee in February 2019.

The Company continues to set more rigorous performance metric targets which are reflected in the table below. The performance metric targets were based on the Company’s 2019

corporate plan and consistent with the Company’s annual guidance included in its February 25, 2019 press release. The 2019 performance metrics and targets set forth below are also consistent with those established for non-executive employees’ 2019 annual incentive bonus (other than cash G&A which is not a performance metric for non-executive employees).

In determining the payout achieved for our annual incentive bonus, actual results and performance metric targets are adjusted to exclude the impacts of acquisitions and divestitures. This eliminates any benefit or detriment to the payout as a result of transactions that were not anticipated at the time the performance metric targets were established. In addition, because of such adjustments, actual results shown above may not agree with the related amounts included in the Company’s consolidated financial statements.

While we do not include TSR, return on capital employed, or other return based performance metric in our annual incentive bonus program, we believe that the Company’s performance relative to target for crude oil production, operating costs, and capital efficiency related performance metrics are key drivers of our share price performance. Although very few of the companies in our compensation peer group currently include return based performance metrics in their annual incentive bonus program, we will continue to monitor our compensation peer group to identify changes in practice.

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 executives with a meaningful proprietary interest in our growth and performance.

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-based incentive awards, which consist entirely of RSUs for all non-executive full-time employees. The Compensation Committee believes that long-term equity-based incentive awards give employees a direct interest in the financial results and 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

Unless circumstances warrant otherwise, the amount of long-term incentives granted to each executive is generally based on the amount that results in targeted total direct

compensation near the market median of executives in equivalent positions at comparable companies, considering individual performance, responsibilities, experience, leadership, and contributions, as well as the Company’s financial, operational, and share price performance.

Allocating Amount of Long-Term Equity-Based Incentive Compensation Among Award Types

In 2018, the amount of long-term equity-based incentive awards granted to executives was allocated 65% to RSUs, 25% to SARs to be settled in cash (“Cash SARs”) and 10% to performance shares. In the Compensation Committee’s opinion, awards of RSUs provide an effective retention incentive and therefore, long-term equity-based incentive compensation has historically been weighted more towards RSUs than other types of awards.

We believe this combination of long-term equity-based incentive awards provides incentives that capture absolute TSR as well as TSR relative to companies included in our stock performance peer group and are generally consistent with the types of long-term equity-based incentive awards used by companies included in our compensation peer group.

2018 Grants of Long-Term Equity-Based Incentives

After considering the recommendations of our CEO for long-term equity-based incentive awards for executives other than himself and competitive market data provided by its

independent compensation consultant, on March 9, 2018, the Compensation Committee approved the 2018 grants of long-term equity-based incentive awards to the Named Executive Officers as set forth below.

RSUs

The RSUs were granted under the 2017 Incentive Plan with a grant date fair value per RSU of $14.67, the closing price of the Company’s common stock on the March 9, 2018 grant date. The RSUs vest ratably over an approximate three-year period, one-third of which vested on March 17, 2019, and an additional one-third of which will vest on each of March 17, 2020 and March 17, 2021.

Cash SARs

The Cash SARs were granted under the 2017 Incentive Plan at an exercise price of $14.67, the closing price of the Company’s common stock on the March 9, 2018 grant date with a grant date fair value per Cash SAR of $7.89, based on a Black-Scholes-Merton option pricing model. The Cash SARs vest ratably over an approximate three-year period, one-third of which vested on March 17, 2019 and an additional one-third of which will vest on each of March 17, 2020 and March 17, 2021. All of the Cash SARs expire March 17, 2025.

Performance Shares

The performance shares were granted under the 2017 Incentive Plan with a grant date fair

value per performance share of $19.09, based on a Monte Carlo simulation model calculated as of the March 9, 2018 grant date. The performance shares cliff vest on March 17, 2021, with the actual number of performance shares to vest ranging from zero to 200% of target based on the Company’s TSR relative to our 2018 Stock Performance Peer Group over an approximate three-year performance period. Linear interpolation will be used to determine the payout multiplier for relative TSR that falls between the percentiles listed above.

As a result of the Company’s final TSR ranking during the performance period, a multiplier of 88% was applied to the 56,517 target performance shares granted in 2015, resulting in the vesting of 49,458 shares in March 2018 and 7,059 shares that did not vest. As a result of the Company’s final TSR ranking during the performance period, a multiplier of 75% was applied to the 41,651 target performance shares granted in 2016, resulting in the vesting of 31,244 shares in March 2019 and 10,407 shares that did not vest.

The Compensation Committee engages Pearl Meyer to annually review the stock performance peer group used to determine

relative TSR for the performance shares. Pearl Meyer follows a process similar to that used to review the compensation peer group except that the selection of companies is not limited to those with a similar financial size and operational similarity is defined as companies with operations in multiple basins similar to the Company with final peer group selections made after considering input from management. The resulting stock performance peer group, along with any changes in the composition of the peer group, is reviewed and approved by the Compensation Committee.

The stock performance peer groups used to determine relative TSR for the performance shares granted in 2017, 2018, and 2019 are presented in the table below. From 2017 to 2018, seven companies were removed due to

a lack of operational similarity either as a result of the Company’s sale of its Utica, Marcellus, and Niobrara assets or because the companies no longer had operations in multiple basins similar to the Company. In order to maintain an appropriately sized peer group, five companies were added with operations in multiple basins similar to the Company. From 2018 to 2019, two companies were removed, one company due to lack of operational similarity because the company no longer had operations in multiple basins similar to the Company and the other company due to its significantly smaller financial size. In order to maintain an appropriately sized peer group, one company was added with operations in multiple basins similar to the Company.

As described in more detail under “—Employment Agreements and Change in Control Severance Plan” and “—Potential Payments to the Named Executive Officers Upon Termination or Change in Control,” we have entered into employment agreements with the Named Executive Officers (the “Amended and Restated Employment Agreements”) and, in 2019, adopted the Carrizo Oil & Gas, Inc. Change in Control Severance Plan (the “CIC Plan”) that provide for specified severance pay and benefits upon certain termination events, including termination events after a change in control. The Amended and Restated Employment

Agreements and CIC Plan contain pay and benefits provisions that we believe are comparable to similar provisions employed by a majority of the companies in our 2019 Compensation Peer Group. The Compensation Committee believes the Amended and Restated Employment Agreements and the CIC Plan encourage executives to remain in our employment, including in the event of a change in control of the Company and during circumstances which indicate that a change in control may occur. The Compensation Committee believes this program is important in maintaining strong leadership and in encouraging retention in these situations.

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 2018 Compensation Peer Group.

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 when final regulations are adopted by the SEC and NASDAQ.

Upon becoming a Named Executive Officer or receiving a promotion to the CEO or CFO position, the individual has a five-year period in which to comply with the stock ownership guidelines. Until the Named Executive Officer has reached their required ownership level, they must maintain at least 30% of the shares

acquired upon vesting of RSUs and performance shares after selling shares to satisfy income tax withholding obligations. As of March 20, 2019, all Named Executive Officers were in compliance with the stock ownership guidelines.

Section 162(m) of the Internal Revenue Code (the “Code”) places a limit of $1.0 million on the amount of compensation that we may deduct in any one year with respect to compensation paid to each covered employee. For years prior to 2018, covered employees included all of our Named Executive Officers other than the CFO, with an exception to the deduction limit for compensation qualified as “performance-based”.

The enactment of the Tax Cuts and Jobs Act on December 22, 2017 repealed the exemption from Section 162(m)’s deduction limit for “performance-based” compensation and the limitation on deductibility was expanded to include any individual who is a Named Executive Officer in 2017 or any later calendar year. As a result, compensation paid to our Named Executive Officers in excess of $1 million will not be deductible for years subsequent to 2017, subject to limited transition relief for arrangements in place as of November 2, 2017.

Section 280G of the Code eliminates the deductibility of excess parachute payments made in connection with a change in control of a corporation, and Section 4999 of the Code imposes a 20% excise tax on such payments.

Excess parachute payments generally occur when the payments made in connection with a change in control exceed three times the participant’s base amount, which is generally the average W-2 earnings for the five calendar years immediately preceding the change in control. The Compensation Committee considers the impact of Section 280G and Section 4999 in connection with its design of executive compensation arrangements. As described further under “—Employment Agreements and Change in Control Severance Plan,” the Compensation Committee has removed the gross-up provisions related to Section 4999 of the Code, and has included provisions in the CIC Plan that will limit the payments made in connection with a change in control if capping such payments will result in a greater net after-tax benefit retained by the participant.

Despite the change in law with respect to Section 162(m) and the continuing constraints presented by Section 280G, the Compensation Committee intends to continue to implement compensation programs that it believes are competitive and in the best interests of the Company and its shareholders.

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 Amended and Restated Employment Agreements of the Named Executive Officers that are described further in “—Employment Agreements and Change in Control Severance Plan” no longer contain a provision for additional payments from the Company in the event that an additional tax is imposed under Section 409A.