10. Shareholders’ Equity and Stock Incentive Plans

Shareholders’ Equity

Common Stock. In December 2010, the Company sold 3.975 million shares of its common stock in an underwritten public offering at a price to the underwriter of $28.90 per share. The Company used the net proceeds of approximately $114.9 million to repay a portion of the outstanding borrowings under the Prior Credit Facility.

In April 2010, the Company sold 3.22 million shares of its common stock in an underwritten public offering at a price to the underwriter of $23.00 per share. The Company used the net proceeds of approximately $73.8 million to repay a portion of the outstanding borrowings under the Prior Credit Facility.

Warrants. On November 24, 2009, the Company entered into a land agreement with an unrelated third party and its affiliate. The land agreement expired pursuant to its terms on May 31, 2011. Under the land agreement, the Company issued warrants to purchase 31,983, 28,576 and 57,641 shares of common stock in 2012, 2011 and 2010, respectively. The final issuance of warrants under the land agreement was granted in April 2012. The warrants have an expiration date of August 21, 2017, an exercise price of $22.09, which may be exercised on a “cashless” basis, and are subject to antidilution adjustments.

Stock Incentive Plans

The Company has established the Incentive Plan of Carrizo Oil & Gas, Inc., as amended (the “Incentive Plan”), which authorizes the granting of stock options, SARs that may be settled in cash or common stock at the option of the Company, restricted stock awards and restricted stock units to directors, employees and independent contractors. The Company may grant awards of up to 7,245,000 shares (subject to certain limitations on restricted stock and restricted stock units) under the Incentive Plan and through December 31, 2012, has issued stock options, restricted stock awards and restricted stock units covering 5,070,325 shares, net of forfeitures and excluding SARs the Company has elected to settle in cash.

Stock Options and Stock SARs. The table below summarizes the activity for stock options and SARs the Company has elected to settle in common stock for the three years ended December 31, 2012, 2011 and 2010:



	Shares		Weighted- Average Exercise Prices		Weighted- Average Remaining Life (In years)	Aggregate Intrinsic Value (In millions)
For the Year Ended December 31, 2010
Outstanding, beginning of period	895,463		$	8.43
Granted	—		—
Exercised	(266,433	)	2.59
Forfeited	(2,493	)	18.56
Other	(211,683	)	20.22
Outstanding, end of period	414,854		$	6.10
Exercisable, end of period	414,854		$	6.10
For the Year Ended December 31, 2011
Outstanding, beginning of period	414,854		$	6.10
Granted	—		—
Exercised	(151,500	)	4.36
Forfeited	—		—
Outstanding, end of period	263,354		$	7.11
Exercisable, end of period	263,354		$	7.11
For the Year Ended December 31, 2012
Outstanding, beginning of period	263,354		$	7.11
Granted	—		—
Exercised	(20,500	)	5.50
Forfeited	—		—
Outstanding, end of period	242,854		$	7.24	0.87	$	3.21
Exercisable, end of period	242,854		$	7.24	0.87	$	3.21

No stock options or SARs were granted under the Incentive Plan during 2010, 2011 or 2012. All SARs issued by the Company contain performance and service conditions. The performance conditions have been met for all awards.

At December 31, 2012, the liability for SARs issued under the Incentive Plan that the Company has elected to be settled in cash was $2.3 million, all of which are vested and are classified as other accrued liabilities. As these awards are fully vested and accounted for as liability awards, the liability is remeasured in earnings at each reporting period fair value until the awards are settled.

At December 31, 2012, all stock options were vested and accordingly, the Company had no unrecognized compensation costs related to outstanding stock options. The total intrinsic value (market price at date of exercise less the exercise price) of stock options exercised during the years ended December 31, 2012, 2011 and 2010 was $0.4 million, $3.6 million, and $6.0 million, respectively, and the Company received $0.1 million, $47,000, and $0.7 million in cash in connection with stock option exercises for the years ended December 31, 2012, 2011 and 2010, respectively.

Restricted Stock Awards and Units. The Company began issuing restricted stock awards in 2005 and restricted stock units in 2009. Although shares of common stock are not released to the employee until vesting, restricted stock awards have the right to vote and accordingly, restricted stock awards are considered issued and outstanding at the date of grant. Restricted stock units, which may be settled in cash or common stock at the Company’s option, do not have the right to vote and are not considered issued and outstanding until converted into common shares and released to the employee upon vesting. The table below summarizes restricted stock award and unit activity for the years ended December 31, 2012, 2011 and 2010:



	Shares/ Units		Grant-date Fair Value
Unvested restricted stock awards and units at January 1, 2010	471,243		$	25.01
Granted	640,207		18.60
Vested	(380,668	)	23.42
Forfeited	(19,827	)	25.23
Unvested restricted stock awards and units at December 31, 2010	710,955		20.26
Granted	567,901		35.27
Vested	(452,585	)	25.29
Forfeited	(25,773	)	23.30
Unvested restricted stock awards and units at December 31, 2011	800,498		27.96
Granted	854,292		25.25
Vested	(488,992	)	25.63
Forfeited	(19,524	)	27.61
Unvested restricted stock awards and units at December 31, 2012	1,146,274		$	26.95

As of December 31, 2012, unrecognized compensation costs related to unvested restricted stock awards and units was $18.6 million and will be recognized as stock-based compensation expense over a weighted-average period of two years. The 2010, 2011 and 2012 grants of certain restricted stock units contained performance and service conditions. The performance conditions have been met for all awards.

Cash-Settled Stock Appreciation Rights Plan

The Company has also established the Carrizo Oil & Gas, Inc. Cash-Settled Stock Appreciation Rights Plan (“Cash SARs Plan”). The Cash SARs Plan enables employees and independent contractors to share in the appreciation of Carrizo’s common stock, but does not require the issuance of shares. During 2012 and 2011, the Company issued 193,336 and 153,801 SARs under the Cash SARs Plan, respectively. At December 31, 2012 and 2011, the liability for such SARs was $4.9 million and $6.5 million, of which, $4.2 million and $5.2 million are classified as other accrued liabilities representing the portion of the awards that are vested or are expected to vest within the next 12 months, with the remainder of $0.7 million and $1.3 million classified as other long-term liabilities, respectively.The following table summarizes the weighted-average assumptions used in the Black-Scholes-Merton option pricing model to calculate the fair value of the SARs issued under the Cash SARs Plan at December 31, 2012 and 2011, respectively:



	2012			2011
Grant date fair value	$	12.23		$	18.50
Volatility factor	48.2		%	61.6		%
Dividend yield	—			—
Risk-free interest rate	0.4		%	0.4		%
Expected term (in years)	3.0			2.9

As of December 31, 2012, unrecognized compensation costs related to unvested SARs issued under the Cash SARs Plan was $0.9 million and will be recognized as stock-based compensation expense over a weighted-average period of 1.9 years. The 2012 grants of SARs under the Cash SARs Plan contained performance and service conditions. The performance conditions have been met for all awards.