EXHIBIT 10.1
 
EXECUTION VERSION
 
SEVENTH AMENDMENT TO CREDIT AGREEMENT
 
SEVENTH AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) dated as of October 29,
2008, by and among CARRIZO OIL & GAS, INC., a Texas corporation (“Borrower”),
certain SUBSIDIARIES OF BORROWER, as Guarantors (in such capacity,
“Guarantors”), the LENDERS party hereto (the “Lenders”), JPMORGAN CHASE BANK,
N.A., as resigning administrative agent for the Lenders (in such capacity, the
“Resigning Agent”) and as resigning issuing bank (in such capacity, the
“Resigning Issuing Bank”) and GUARANTY BANK, as successor administrative agent
for the Lenders (in such capacity, the “Successor Agent”) and as successor
issuing bank (in such capacity, the “Successor Issuing Bank”).  Unless otherwise
expressly defined herein, capitalized terms used but not defined in this
Amendment have the meanings assigned to such terms in the Credit Agreement (as
defined below).
 
WITNESSETH:
 
 
WHEREAS, Borrower, Guarantors, Resigning Agent and certain Lenders have entered
into that certain Credit Agreement, dated as of May 25, 2006 (as the same has
been and may hereafter be amended, restated, supplemented or otherwise modified
from time to time, the “Credit Agreement”); and
 
WHEREAS, Resigning Agent and Resigning Issuing Bank desire to resign as
Administrative Agent and Issuing Bank, respectively, under the Credit Agreement
and Successor Agent and Successor Issuing Bank desire to be appointed as
Administrative Agent and Issuing Bank, respectively, under the Credit Agreement;
and
 
WHEREAS, Borrower has requested that Successor Agent and Lenders (a) amend the
Credit Agreement (i) to increase the Borrowing Base and the Conforming Borrowing
Base, (ii) to extend the Maturity Date and (iii) for certain other purposes as
provided herein; and (b) waive any Event of Default that has occurred as a
result of the existence of the Liens more particularly described in Schedule
7.02 attached hereto (the “Specified Event of Default”); and
 
WHEREAS, Successor Agent and Lenders have agreed to (a) amend the Credit
Agreement as provided herein, and (b) waive the Specified Event of Default, in
each case, subject to the terms and conditions set forth herein.
 
NOW, THEREFORE, for and in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and confessed, the parties hereto
hereby agree as follows:
 
SECTION 1.  Amendments to Credit Agreement.  Subject to the satisfaction or
waiver in writing of each condition precedent set forth in Section 7 of this
Amendment, and in reliance on the representations, warranties, covenants and
agreements contained in this Amendment, the Credit Agreement shall be amended in
the manner provided in this Section 1.
 
    1.1     Cover Page.  The cover page to the Credit Agreement shall be and it
hereby is amended in its entirety and replaced with the cover page attached
hereto as Annex A.
 
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1.2    Preamble.  The preamble to the Credit Agreement shall be and it hereby is
amended by deleting the reference to “JPMORGAN CHASE BANK, NATIONAL ASSOCIATION”
and substituting in lieu thereof the name “GUARANTY BANK”.
 
1.3    Additional Definitions.  The following definitions shall be and they
hereby are added to Section 1.01 of the Credit Agreement in appropriate
alphabetical order:
 
“Adjusted Daily LIBO Rate” means, for any day, an interest rate per annum
(rounded upwards, if necessary, to the next 1/16 of 1%) equal to (a) the Daily
LIBO Rate on such day (or, if such day is not a Business Day, on the immediately
preceding Business Day) multiplied by (b) the Statutory Reserve Rate applicable
on such day (or, if such day is not a Business Day, on the immediately preceding
Business Day).
 
 “Avista” means Avista Capital Partners II, L.P., a Delaware limited
partnership, and its successors and permitted assigns.
 
“Avista JV Partner” means ACP II Marcellus LLC, a Delaware limited liability
company, and its successors and permitted assigns.
 
“Carrizo Marcellus” means Carrizo (Marcellus) LLC, a Delaware limited liability
company, and its successors and permitted assigns.
 
“Cash Collateral Account” has the meaning assigned to such term in Section
2.05(j).
 
“Cash Management Obligations” means, with respect to any Credit Party, any
obligations of such Credit Party owed to Guaranty Bank or any of its Affiliates 
in respect of treasury management arrangements, depositary or other cash
management services.
 
“Commitment Increase Amount” has the meaning assigned to such term in Section
2.02A.
 
“Daily LIBO Rate” means, for any day, the rate appearing on Reuters BBA Libor
Rates Page 3750 (or on any successor or substitute page of such service, or any
successor to or substitute for such service, providing rate quotations
comparable to those currently provided on such page of such service, as
determined by the Administrative Agent from time to time for purposes of
providing quotations of interest rates applicable to dollar deposits in the
London interbank market) at approximately 11:00 a.m., London time, on such day,
as the rate for dollar deposits with a maturity equal to one (1) month.  In the
event that such rate is not available at such time for any reason, then the
"Daily LIBO Rate" for such day shall be the rate determined by the
Administrative Agent to be the average of the rates at which dollar deposits of
$5,000,000 with a maturity equal to one (1) month are offered to major banks in
the London interbank market in London, England by leading banks in the London
interbank market selected by
 
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the Administrative Agent in immediately available funds in the London interbank
market at approximately 11:00 a.m., London time, on such day.
 

 
“Fee Letter” means that certain Fee Letter, dated as of October 29, 2008,
between Borrower and Guaranty Bank.
 
“Guaranty Bank” means Guaranty Bank, a federal saving bank.
 
“Lender Certificate” has the meaning assigned to such term in Section 2.02A.
 
“Marcellus Holdings” means Carrizo Marcellus Holding Inc., a Delaware
corporation, and its successors and permitted assigns.
 
“Marcellus Joint Venture” means that certain joint venture between Carrizo
Marcellus and Avista JV Partner pursuant to which Carrizo Marcellus intends to
dedicate the Marcellus Properties to such joint venture; provided that such
joint venture is governed by the Marcellus JV Operating Agreement, the Marcellus
JV Participation Agreement and such other documents, agreements and instruments
delivered in connection therewith.
 
“Marcellus JV Documents” means the Marcellus JV Operating Agreement, the
Marcellus JV Participation Agreement and any other documents, agreements and
instruments governing the Marcellus Joint Venture, in each case, as the same may
be amended, modified or supplemented from to time to time to the extent
permitted hereunder.
 
“Marcellus JV Operating Agreement” means a certain Operating Agreement between
Carrizo Marcellus and Avista JV Partner relating to the Marcellus Joint Venture
and containing terms and conditions substantially similar to, and no less
favorable to the Lenders in any material respect than, those set forth in that
certain draft Operating Agreement distributed to the Administrative Agent and
Lenders on October 22, 2008, as the same may be amended, modified or
supplemented from time to time to the extent permitted hereunder.
 
“Marcellus JV Participation Agreement” means a certain Participation Agreement
among Borrower, Carrizo Marcellus, Avista and Avista JV Partner relating to the
Marcellus Joint Venture and containing terms and conditions substantially
similar to, and no less favorable to the Lenders in any material respect than,
those set forth in that certain draft Participation Agreement distributed to the
Administrative Agent and Lenders on October 22, 2008, as the same may be
amended, modified or supplemented from time to time to the extent permitted
hereunder.
 
“Marcellus Properties” means those certain Oil and Gas Interests of Carrizo
Marcellus that are located in Pennsylvania, New York, Maryland,
 
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Virginia and/or West Virginia and will be dedicated to the Marcellus Joint
Venture.
 
“Seventh Amendment Effective Date” means October 29, 2008.
 
1.4    Amended Definitions.  The following definitions in Section 1.01 of the
Credit Agreement shall be and they hereby are amended in their respective
entireties to read as follows:
 
“Administrative Agent” means Guaranty Bank, in its capacity as contractual
representative of the Lenders hereunder pursuant to ARTICLE X and not in its
individual capacity as a Lender, and any successor agent appointed pursuant to
ARTICLE X.
 
“Aggregate Commitment” means, as of the Seventh Amendment Effective Date,
$222,500,000 and thereafter as such amount may be reduced or increased from time
to time pursuant to Section 2.02 and Section 2.02A and as a result of changes in
the Borrowing Base; provided that such amount shall not at any time exceed the
lesser of (i) the Maximum Facility Amount and (ii) the Borrowing Base then in
effect.  If at any time the Borrowing Base is reduced below the Aggregate
Commitment, the Aggregate Commitment shall be reduced automatically to the
amount of the Borrowing Base in effect at such time.
 
“Applicable Rate” means, for any day, with respect to any ABR Loan or Eurodollar
Loan, or with respect to the Unused Commitment Fees payable hereunder, as the
case may be, the applicable rate per annum set forth below under the caption
“ABR Spread”, “Eurodollar Spread” or “Unused Commitment Fee Rate”, as the case
may be, based upon the Borrowing Base Usage applicable on such date:
 
Borrowing
Base Usage
Eurodollar
Spread
ABR  
Spread
Unused Commitment Fee Rate
         
Greater than or
equal to 100%
350 b.p.
225 b.p.
37.5 b.p.
       
Greater than 90% and less than 100%
275 b.p.
150 b.p.
37.5 b.p.
       
Greater than 75% and less than or equal to 90%
250 b.p.
125 b.p.
50 b.p.
       
Greater than 50% and less than or equal to 75%
225 b.p.
100 b.p.
50 b.p.
       
Less than or equal
to 50%
200 b.p.
75 b.p.
50 b.p.

 
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Each change in the Applicable Rate shall apply during the period commencing on
the effective date of such change and ending on the date immediately preceding
the effective date of the next change.
 
“Business Day” means any day that is not a Saturday, Sunday or other day on
which commercial banks in Houston, Texas  are authorized or required by law to
remain closed; provided that, when used in connection with a Eurodollar Loan,
the term “Business Day” shall also exclude any day on which banks are not open
for dealings in dollar deposits in the London interbank market.
 
“Commitment” means, with respect to each Lender, the commitment of such Lender
to make Loans and to acquire participations in Letters of Credit hereunder,
expressed as an amount representing the maximum aggregate amount of such
Lender’s Credit Exposure hereunder, as such commitment may be (a) reduced from
time to time pursuant to Section 2.02, (b) increased from time to time as a
result of changes in the Aggregate Commitment pursuant to Section 2.02A, (c)
reduced or increased from time to time as a result of changes to the Borrowing
Base, and (d) reduced or increased from time to time pursuant to assignments by
or to such Lender pursuant to Section 11.04; provided that no Lender’s
Commitment shall exceed such Lender’s Applicable Percentage of the lesser of (x)
the Maximum Facility Amount and (y) the Borrowing Base then in effect.  The
initial amount of each Lender’s Commitment (which amount is such Lender’s
Applicable Percentage of the Aggregate Commitment) is set forth in Schedule
2.01, or in the Assignment and Assumption or Lender Certificate pursuant to
which such Lender shall have assumed or agreed to provide its Commitment, as
applicable.
 
“Conforming Date” means January 1, 2010.
 
“Consolidated EBITDAX” means the Borrower’s consolidated earnings determined in
accordance with GAAP (excluding earnings of Unrestricted Subsidiaries) before
interest expense, income taxes, depreciation, amortization, depletion, oil and
gas asset impairment write downs, lease impairment expense, gains and losses
from the sale of capital assets, and other non-cash charges.  For purposes of
calculating Consolidated EBITDAX, Consolidated EBITDAX shall not include (a) the
non-cash effects of (i) the early extinguishment of long-term debt, (ii) CCBM’s
equity investment in Pinnacle and (iii) any stock option re-pricing expenses,
(b) the income (or deficit) of any Person that is not a Subsidiary in which the
Borrower or any of its Restricted Subsidiaries has an Equity Interest, except to
the extent of the amount of dividends or other distributions actually paid to
the Borrower or any of its Restricted Subsidiaries, (c) the income (or deficit)
of any Restricted Subsidiary in which any other Person (other than the Borrower
or any of its Restricted Subsidiaries) has an Equity Interest, except to the
extent that the declaration or payment of dividends or similar distributions by
such Restricted Subsidiary is not prohibited by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to such Restricted Subsidiary, and (d) any
portion of the
 
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consolidated earnings of Marcellus Holdings that is allocated or remitted to
Avista or Avista JV Partner in accordance with the Marcellus JV Participation
Agreement or the Marcellus JV Operating Agreement.
 

 
“Defaulting Lender” means any Lender that (a) has failed to fund any portion of
the Loans or any participation in any Letter of Credit required to be funded by
it hereunder within one Business Day of the date required to be funded by it
hereunder, (b) has notified the Borrower, the Administrative Agent, the Issuing
Bank or any Lender in writing that it does not intend to comply with any of its
funding obligations under this Agreement or has made a public statement to the
effect that it does not intend to comply with its funding obligations under this
Agreement, (c) has otherwise failed to pay over to the Administrative Agent or
any other Lender any other amount required to be paid by it hereunder within one
Business Day of the date when due, unless the subject of a good faith dispute,
or (d) has been deemed insolvent or become the subject of a bankruptcy or
insolvency proceeding.
 
“Issuing Bank” means Guaranty Bank, in its capacity as the issuer of Letters of
Credit hereunder, and its successors in such capacity as provided in Section
2.05(i).  The Issuing Bank may, in its discretion, arrange for one or more
Letters of Credit to be issued by Affiliates of the Issuing Bank, in which case
the term “Issuing Bank” shall include any such Affiliate with respect to Letters
of Credit issued by such Affiliate.
 
“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest
Period, the rate appearing on Reuters BBA Libor Rates Page 3750 (or on any
successor or substitute page of such service, or any successor to or substitute
for such service, providing rate quotations comparable to those currently
provided on such page of such service, as determined by the Administrative Agent
from time to time for purposes of providing quotations of interest rates
applicable to dollar deposits in the London interbank market) at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such
Interest Period, as the rate for dollar deposits with a maturity comparable to
such Interest Period.  In the event that such rate is not available at such time
for any reason, then the “LIBO Rate” with respect to such Eurodollar Borrowing
for such Interest Period shall be the rate at which dollar deposits of
$5,000,000 and for a maturity comparable to such Interest Period are offered to
major banks in the London interbank market in London, England by leading banks
in the London interbank market selected by the Administrative Agent in
immediately available funds in the London interbank market at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such
Interest Period.
 
“Maturity Date” means October 29, 2012.
 
“Maximum Facility Amount” means $500,000,000.
 
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“Obligations” means (a) all obligations of every nature of the Borrower and the
other Credit Parties from time to time owed to the Administrative Agent, the
Issuing Bank, the Lenders or any of them and the Lender Counterparties under any
Loan Document or Swap Agreement (including, with respect to any Swap Agreement,
obligations owed under any Swap Agreement to any Person that was a Lender
Counterparty at the time such Swap Agreement was entered into), whether for
principal, interest, reimbursement of amounts drawn under any Letter of Credit,
payments for early termination of Swap Agreements, funding indemnification
amounts, fees, expenses, indemnification or otherwise and (b) Cash Management
Obligations.
 
“Prime Rate” means the rate of interest per annum publicly announced from time
to time by Guaranty Bank as its prime rate in effect at its principal office in
Houston, Texas.  Each change in the Prime Rate shall be effective from and
including the date such change is publicly announced as being effective.
 
“Redetermination Date” means (a) with respect to any Scheduled Redetermination,
each March 31 and September 30 of each year, commencing March 31, 2009, and
(b) with respect to any Special Redetermination (other than the Special
Redetermination set forth in the following clause (c)), the first day of the
first month which is not less than twenty (20) Business Days following the date
of a request for a Special Redetermination and (c) with respect to any
Redetermination pursuant to Section 7.04, the date notice of such
Redetermination is delivered to the Borrower pursuant to Section 3.06.
 
“Secured Parties” means the holders from time to time of the Obligations, and
“Secured Party” means any of them.
 
“Statutory Reserve Rate” means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject (a) with
respect to the Base CD Rate, for new negotiable nonpersonal time deposits in
dollars over $100,000 with maturities approximately equal to three months and
(b) with respect to the Adjusted LIBO Rate or the Adjusted Daily LIBO Rate, for
Eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in
Regulation D of the Board).  Such reserve percentages shall include those
imposed pursuant to such Regulation D.  Eurodollar Loans shall be deemed to
constitute Eurocurrency funding and to be subject to such reserve requirements
without benefit of or credit for proration, exemptions or offsets that may be
available from time to time to any Lender under such Regulation D or any
comparable regulation.  The Statutory Reserve Rate shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.
 
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1.5    Increases in the Aggregate Commitment.  The Credit Agreement shall be and
it hereby is amended by adding a new Section 2.02A immediately after Section
2.02 to read as follows:
 
Section 2.02A Increases in the Aggregate Commitment.  So long as no Default has
occurred and is continuing or would arise as a result thereof, it is agreed by
the parties hereto that one or more financial institutions acceptable to the
Borrower and the Administrative Agent may become a Lender under this Agreement
or a Lender may increase its Commitment, in each case, with the consent of the
Administrative Agent and by executing and delivering to the Borrower and the
Administrative Agent a certificate substantially in the form of Exhibit E hereto
(a “Lender Certificate”).  No Lender shall have any obligation to increase its
Commitment hereunder in connection with any increase in the Aggregate Commitment
pursuant to this Section 2.02A.  Upon receipt and agreement by the Borrower and
the Administrative Agent of any such Lender Certificate, (a) the Aggregate
Commitment automatically, without further action by the Borrower, the
Administrative Agent or any Lender, shall be increased by the amount indicated
in such Lender Certificate on the effective date set forth in such Lender
Certificate (the amount of such increase, the “Commitment Increase Amount”);
provided that (a) the Commitment Increase Amount together with the existing
Aggregate Commitment does not, in the aggregate, exceed the lesser of (i) the
Maximum Facility Amount and (ii) the Borrowing Base then in effect, (b) the
Register shall be amended to add the Commitment of such additional Lender or to
reflect the increase in the Commitment of an existing Lender, and the Applicable
Percentages of the Lenders shall be adjusted accordingly to reflect the
additional Lender or the increase in the Commitment of an existing Lender, (c)
any such additional Lender shall be deemed to be a party in all respects to this
Agreement and any other Loan Document to which the Lenders are a party, (d) upon
the effective date set forth in such Lender Certificate, any such Lender party
to the Lender Certificate shall purchase a pro rata portion of the outstanding
Credit Exposure of each of the existing Lenders such that the Lenders (including
any additional Lender, if applicable) shall have the appropriate portion of the
Aggregate Credit Exposure (based in each case on such Lender’s Applicable
Percentage, as revised pursuant to this Section), and (e) the Borrower shall
have paid to the Administrative Agent, for the benefit of any additional Lender
and any existing Lender increasing its Commitment, any and all fees payable in
the amounts and at the times separately agreed upon between the Borrower and the
Administrative Agent.
 
1.6    Letters of Credit.  Clause (b) of Section 2.05 of the Credit Agreement
shall be and it hereby is amended in its entirety to read as follows:
 
(b)           Notice of Issuance, Amendment, Renewal, Extension; Certain
Conditions.  To request the issuance of a Letter of Credit (or the amendment,
renewal or extension of an outstanding Letter of Credit), the Borrower shall
hand deliver or telecopy (or transmit by electronic communication, if
arrangements for doing so have been approved by the Issuing Bank) to the Issuing
Bank and the
 
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Administrative Agent (reasonably in advance of the requested date of issuance,
amendment, renewal or extension) a notice requesting the issuance of a Letter of
Credit, or identifying the Letter of Credit to be amended, renewed or extended,
and specifying the date of issuance, amendment, renewal or extension (which
shall be a Business Day), the date on which such Letter of Credit is to expire
(which shall comply with paragraph (c) of this Section), the amount of such
Letter of Credit, the name and address of the beneficiary thereof and such other
information as shall be necessary to prepare, amend, renew or extend such Letter
of Credit.  If requested by the Issuing Bank, the Borrower also shall submit a
letter of credit application on the Issuing Bank’s standard form in connection
with any request for a Letter of Credit.  A Letter of Credit shall be issued,
amended, renewed or extended only if (and upon issuance, amendment, renewal or
extension of each Letter of Credit the Borrower shall be deemed to represent and
warrant that), after giving effect to such issuance, amendment, renewal or
extension (i) the LC Exposure shall not exceed $20,000,000 and (ii) the
Aggregate Credit Exposure shall not exceed the Aggregate
Commitment.  Notwithstanding the foregoing, the Issuing Bank shall not at any
time be obligated to issue, amend, renew or extend any Letter of Credit if any
Lender is at such time a Defaulting Lender hereunder, unless (x) the Borrower
cash collateralizes such Defaulting Lender’s portion of the total LC Exposure
(calculated after giving effect to the issuance, amendment, renewal or extension
of such Letter of Credit) in accordance with the procedures set forth in Section
2.05(j) or (y) the Issuing Bank has entered into arrangements satisfactory to
the Issuing Bank in its sole discretion with the Borrower or such Defaulting
Lender to eliminate the Issuing Bank’s risk with respect to such Defaulting
Lender.
 

 
1.7    Letters of Credit.  Clause (j) of Section 2.05 of the Credit Agreement
shall be and it hereby is amended in its entirety to read as follows:
 
(j)           Cash Collateralization.
 
(i)           If at any time the Borrower elects to cash collateralize the LC
Exposure of any Defaulting Lender pursuant to Section 2.05(b), the Borrower
shall deposit in an account with the Administrative Agent, in the name of the
Administrative Agent and for the benefit of the Lenders (the “Cash Collateral
Account”), an amount in cash equal to such Defaulting Lender’s portion of the
total LC Exposure at such time as calculated pursuant to clause (x) of Section
2.05(b) (less any amounts already on deposit in such Cash Collateral Account
representing cash collateral for any portion of such Defaulting Lender’s portion
of the total LC Exposure).
 
(ii)           If any Letter of Credit is outstanding at the time any Lender is
a Defaulting Lender, upon the written request of the Issuing Bank demanding the
deposit of cash collateral pursuant to this paragraph, the Borrower shall
promptly, and in any event within one (1) Business Day after receipt of such
written request, cash collateralize such Defaulting Lender’s portion of the
total LC Exposure at such time by depositing in
 
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the Cash Collateral Account an amount in cash equal to such Defaulting Lender’s
portion of the total LC Exposure at such time (less any amounts already on
deposit in such Cash Collateral Account representing cash collateral for any
portion of such Defaulting Lender’s portion of the total LC Exposure).
 
(iii)           If any Event of Default shall occur and be continuing, on the
Business Day that the Borrower receives notice from the Administrative Agent or
the Required Lenders (or, if the maturity of the Loans has been accelerated,
Lenders with LC Exposure representing greater than 66-2/3% of the total LC
Exposure) demanding the deposit of cash collateral pursuant to this paragraph,
the Borrower shall deposit in the Cash Collateral Account an amount in cash
equal to the total LC Exposure as of such date plus any accrued and unpaid
interest thereon; provided that the obligation to deposit such cash collateral
shall become effective immediately, and such deposit shall become immediately
due and payable, without demand or other notice of any kind, upon the occurrence
of any Event of Default with respect to the Borrower described in clause (h) or
(i) of ARTICLE IX.
 
(iv)           Deposits in the Cash Collateral Account made pursuant to the
foregoing paragraphs (i), (ii) and (iii) shall be held by the Administrative
Agent as collateral for the payment and performance of the obligations of the
Borrower under this Agreement.  The Administrative Agent shall have exclusive
dominion and control, including the exclusive right of withdrawal, over the Cash
Collateral Account.  Other than any interest earned on the investment of such
deposits and interest at the rate per annum in effect for accounts of the same
type maintained with the Administrative Agent at such time, which investments
shall be made at the option and sole discretion of the Administrative Agent and
at the Borrower’s risk and expense, such deposits shall not bear
interest.  Interest or profits, if any, on such investments shall accumulate in
such account.  Moneys in such account shall be applied by the Administrative
Agent to reimburse the Issuing Bank for LC Disbursements for which it has not
been reimbursed and, to the extent not so applied, shall be held for the
satisfaction of the reimbursement obligations of the Borrower for the LC
Exposure at such time or, if the maturity of the Loans has been accelerated (but
subject to the consent of Lenders with LC Exposure  representing 66-2/3% or more
of the total LC Exposure), be applied to satisfy other obligations of the
Borrower under this Agreement.
 
(v)           If the Borrower is required to provide an amount of cash
collateral pursuant to paragraphs (i), (ii) or (iii) above, such amount (to the
extent not applied as aforesaid) shall be returned to the Borrower within three
Business Days after (x) in the case of cash collateral provided pursuant to
paragraphs (i) or (ii) above, the applicable Defaulting Lender is no longer a
Defaulting Lender and (y) in the case of cash collateral
 
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provided pursuant to paragraph (iii) above, all Events of Default have been
cured or waived.
 
1.8    Fees.  Clauses (b) and (c) of Section 2.11 of the Credit Agreement shall
be and they hereby are amended in their respective entireties to read as
follows:
 
(b)           The Borrower agrees to pay (i) to the Administrative Agent for the
account of each Lender a participation fee with respect to its participations in
Letters of Credit, which shall accrue at the same Applicable Rate used to
determine the interest rate applicable to Eurodollar Loans on the average daily
amount of such Lender’s LC Exposure (excluding any portion thereof attributable
to unreimbursed LC Disbursements) during the period from and including the
Effective Date to but excluding the later of the date on which such Lender’s
Commitment terminates and the date on which such Lender ceases to have any LC
Exposure, and (ii) to the Issuing Bank a fronting fee, which shall accrue at a
rate of 0.125% per annum on the average daily amount of the LC Exposure
(excluding any portion thereof attributable to unreimbursed LC Disbursements)
during the period from and including the Seventh Amendment Effective Date to but
excluding the later of the date of termination of the Aggregate Commitment and
the date on which there ceases to be any LC Exposure, as well as the Issuing
Bank’s standard fees with respect to the issuance, amendment, renewal or
extension of any Letter of Credit or processing of drawings
thereunder.  Participation fees and fronting fees accrued through and including
the last day of March, June, September and December of each year shall be
payable on the third Business Day following such last day, commencing on the
first such date to occur after the Effective Date (or in the case of the
fronting fee, the first such date to occur after the Seventh Amendment Effective
Date); provided that all such fees shall be payable on the date on which the
Aggregate Commitment terminates and any such fees accruing after the date on
which the Aggregate Commitment terminates shall be payable on demand.  Any other
fees payable to the Issuing Bank pursuant to this paragraph shall be payable
within 10 days after demand.  All participation fees and fronting fees shall be
computed on the basis of a year of 360 days and shall be payable for the actual
number of days elapsed (including the first day but excluding the last day).
 
(c)           Borrower agrees to pay to the Administrative Agent, for its own
account, fees payable in the amounts and at the times separately agreed upon
between the Borrower and the Administrative Agent (including, without
limitation, the fees set forth in the Fee Letter).
 
1.9    Interest.  Clause (a) of Section 2.12 of the Credit Agreement shall be
and it hereby is amended in its entirety to read as follows:
 
(a)           The Loans comprising each ABR Borrowing shall bear interest at the
Alternate Base Rate plus the Applicable Rate with respect to ABR Loans; provided
that the interest rate on any ABR Loan for any day shall never be less
 
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than the sum of (i) the Adjusted Daily LIBO Rate on such day plus (ii) the
Applicable Rate with respect to Eurodollar Loans on such day.
 
1.10    Payments Generally; Pro Rata Treatment; Sharing of Set-offs.  Clauses
(a), (b) and (e) of Section 2.17 of the Credit Agreement shall be and they
hereby are amended in their respective entireties to read as follows:
 
(a)           The Borrower shall make each payment required to be made by it
hereunder (whether of principal, interest, fees or reimbursement of LC
Disbursements, or of amounts payable under Section 2.14, Section 2.15 or Section
2.16, or otherwise) prior to 12:00 noon, on the date when due, in immediately
available funds, without set-off or counterclaim.  Any amounts received after
such time on any date may, in the discretion of the Administrative Agent, be
deemed to have been received on the next succeeding Business Day for purposes of
calculating interest thereon.  All such payments shall be made to the
Administrative Agent at its offices at 333 Clay Street, Suite 4400, Houston,
Texas 77002, except payments to be made directly to the Issuing Bank as
expressly provided herein and except that payments pursuant to Section 2.14,
Section 2.15, Section 2.16 and Section 11.03 shall be made directly to the
Persons entitled thereto.  The Administrative Agent shall distribute any such
payments received by it for the account of any other Person to the appropriate
recipient promptly following receipt thereof in like funds as received.  If any
payment hereunder shall be due on a day that is not a Business Day, the date for
payment shall be extended to the next succeeding Business Day, and, in the case
of any payment accruing interest, interest thereon shall be payable for the
period of such extension.  All payments hereunder shall be made in Dollars.
 
(b)           If at any time insufficient funds are received by and available to
the Administrative Agent to pay fully all amounts of principal, unreimbursed LC
Disbursements, interest and fees then due hereunder, such funds shall be applied
(i) first, towards payment of interest and fees then due hereunder, ratably
among the parties entitled thereto in accordance with the amounts of interest
and fees then due to such parties, and (ii) second, towards payment of principal
and unreimbursed LC Disbursements then due hereunder, ratably among the parties
entitled thereto in accordance with the amounts of principal and unreimbursed LC
Disbursements then due to such parties; provided that in the event such funds
are received by and available to the Administrative Agent as a result of the
exercise of any rights and remedies with respect to any collateral under the
Security Instruments, the parties entitled to a ratable share of such funds
pursuant to the foregoing clause (ii) and the determination of each parties’
ratable share shall include, on a pari passu basis, (x) the Lender
Counterparties and the actual aggregate amounts then due and owing to each
Lender Counterparty by the Borrower or any Guarantor as a result of the early
termination of any transactions under any Swap Agreements included in the
Obligations (after giving effect to any netting agreements) and (y) Cash
Management Obligations then due and owing to Guaranty Bank or any of its
Affiliates by the Borrower or any Guarantor.
 
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(e)           If any Lender shall fail to make any payment required to be made
by it pursuant to Section 2.05(d), Section 2.05(e), Section 2.06(b), Section
2.17(d) or Section 11.03(c), then the Administrative Agent may, in its
discretion (notwithstanding any contrary provision hereof), apply any amounts
thereafter received by the Administrative Agent for the account of such Lender
to satisfy such Lender’s obligations under such Sections until all such
unsatisfied obligations are fully paid.  Notwithstanding anything to the
contrary contained in this Agreement, but subject in all respects to the
foregoing sentence, at any time and from time to time any Lender is a Defaulting
Lender, any amounts received by the Administrative Agent for the repayment of
principal on the Loans or reimbursement of any LC Disbursement shall be applied
ratably to prepay the Loans of, and reimbursement obligations owed to, all
non-Defaulting Lenders until such time as each non-Defaulting Lender’s pro rata
portion of the Aggregate Credit Exposure is equal to its Applicable Percentage.
 
1.11    Reserve Report; Proposed Borrowing Base; Conforming Borrowing
Base.  Section 3.01 of the Credit Agreement shall be and it hereby is amended in
its entirety to read as follows:
 
Section 3.01.  Reserve Report; Proposed Borrowing Base; Conforming Borrowing
Base.  During the period from the Seventh Amendment Effective Date until the
first Redetermination after the Seventh Amendment Effective Date, the Borrowing
Base shall be $250,000,000 and the Conforming Borrowing Base shall be
$215,000,000.  As soon as available and in any event by February 28 and August
31 of each year, beginning February 28, 2009, the Borrower shall deliver to the
Administrative Agent and each Lender a Reserve Report, prepared as of the
immediately preceding December 31 and June 30, respectively, in form and
substance reasonably satisfactory to the Administrative Agent and prepared by an
Approved Petroleum Engineer (or, in the case of any Reserve Report other than
the Reserve Report due on February 28 of each year, by petroleum engineers
employed by the Borrower or its Subsidiaries) together with such other
information, reports and data concerning the value of the Borrowing Base
Properties as the Administrative Agent shall deem reasonably necessary to
determine the value of such Borrowing Base Properties.  Simultaneously with the
delivery to the Administrative Agent and the Lenders of each Reserve Report, the
Borrower shall submit to the Administrative Agent and each Lender the Borrower’s
requested amount of the Borrowing Base as of the next Redetermination
Date.  Promptly after the receipt by the Administrative Agent of such Reserve
Report and Borrower’s requested amount for the Borrowing Base, the
Administrative Agent shall submit to the Lenders a recommended amount of the
Borrowing Base and, with respect to any Redetermination prior to the Conforming
Date, the Conforming Borrowing Base as of the next Redetermination Date;
provided that no Redetermination of the Conforming Borrowing Base shall be
required after the Conforming Date.
 
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1.12    Capitalization.  Section 4.13 of the Credit Agreement shall be and it
hereby is amended by deleting the phrase “Effective Date” located therein and
substituting in lieu thereof the phrase “Seventh Amendment Effective Date”.
 
1.13    Deposit Accounts.  Section 4.18 of the Credit Agreement shall be and it
hereby is amended in its entirety to read as follows:
 
Section 4.18.  Deposit Accounts.  From and after sixty (60) days after the
Seventh Amendment Effective Date (or such longer time as acceptable to
Administrative Agent in its sole discretion), except for deposit and investment
accounts maintained at financial institutions other than the Administrative
Agent the aggregate balance of which does not exceed $200,000 at any time for
all such other deposit and investment accounts taken as a whole, no Credit Party
maintains any deposit or investment account (and no Affiliate of any Credit
Party maintains any deposit or investment account) into which either (a)
proceeds of Hydrocarbon production from the Oil and Gas Interests included in
the Borrowing Base Properties are deposited or (b) distributions and dividends
on Equity Interests owned by any Credit Party are paid and deposited, in each
case, other than (x) deposit or investment accounts maintained with the
Administrative Agent or (y) deposit or investment accounts maintained with other
financial institutions acceptable to the Administrative Agent with respect to
which a control agreement in favor of the Administrative Agent for the benefit
of the Secured Parties, in form and substance reasonably satisfactory to the
Administrative Agent, has been executed and delivered.
 
1.14    Financial Statements; Other Information.  Clause (e) of Section 6.01 of
the Credit Agreement shall be and it hereby is amended in its entirety to read
as follows:
 
(e)           as soon as available, and in any event no later than February 28
and August 31 of each year, the Reserve Reports required on such dates pursuant
to Section 3.01;
 
1.15    Notice of Material Events.  The lead-in sentence to Section 6.02 of the
Credit Agreement shall be and it hereby is amended in its entirety to read as
follows:
 
Section 6.02  Notices of Material Events.  The Borrower shall promptly notify
the Administrative Agent in writing of each of the following (and the
Administrative Agent shall promptly notify each Lender of the occurrence
thereof):
 
1.16    Restricted Subsidiaries.  Section 6.13 of the Credit Agreement shall be
and it hereby is amended by deleting the phrase “Effective Date” located in
clause (a) therein and substituting in lieu thereof the phrase “Seventh
Amendment Effective Date”.
 
1.17    Production Proceeds and Bank Accounts.  Section 6.15 of the Credit
Agreement shall be and it hereby is amended in its entirety to read as follows:
 
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Section 6.15.  Production Proceeds and Bank Accounts.  Within sixty (60) days
after the Seventh Amendment Effective Date (or such longer time as acceptable to
Administrative Agent in its sole discretion), subject to the terms and
conditions of the Mortgages, each Credit Party shall cause all production
proceeds and revenues attributable to the Oil and Gas Interests of such Credit
Party and all distributions and dividends on any Equity Interests owned by any
Credit Party to be paid and deposited into deposit accounts of such Credit Party
maintained with the Administrative Agent or with other financial institutions
acceptable to the Administrative Agent and cause all such deposit accounts at
such other financial institutions (other than deposit and investment accounts
the aggregate balance of which does not exceed $200,000 at any time for all such
other deposit and investment accounts taken as a whole) to be subject to a
control agreement in favor of the Administrative Agent for the benefit of the
Secured Parties, in form and substance reasonably satisfactory to the
Administrative Agent (each, an “Eligible Account”).
 
1.18    Liens.  Section 7.02 of the Credit Agreement shall be and it hereby is
amended by (a) deleting the “and” at the end of clause (g) thereof, (b) deleting
the period at the end of clause (h) thereof and substituting in lieu thereof the
phrase “; and” and (c) adding a new clause (i) to the end thereof to read as
follows:
 
(i)           Liens consisting of beneficial ownership interests of Avista JV
Partner in the Marcellus Properties; provided that such Marcellus Properties do
not constitute Borrowing Base Properties.
 
1.19    Dispositions.  Clause (b) of Section 7.04 of the Credit Agreement shall
be and it hereby is amended in its entirety to read as follows:
 
(b)           Dispositions of (i) Borrowing Base Properties or (ii) one hundred
percent (100%) of the Equity Interests of any Restricted Subsidiary that owns
Borrowing Base Properties, in each case, made between Scheduled Redeterminations
of the Borrowing Base; provided that the Engineered Value of all Borrowing Base
Properties subject to Dispositions referenced in clause (i) above and the
Engineered Value of all Borrowing Base Properties owned by each Restricted
Subsidiary subject to Dispositions referenced in clause (ii) above, does not
exceed, in the aggregate for all such Dispositions made between Scheduled
Redeterminations, five percent (5%) of the Borrowing Base most recently
determined;
 
1.20    Dispositions.  Clause (c) of Section 7.04 of the Credit Agreement shall
be and it hereby is amended in its entirety to read as follows:
 
(c)           subject to the prior written consent of the Required Lenders, any
other Disposition of (x) Borrowing Base Properties or (y) one hundred percent
(100%) of the Equity Interests of any Restricted Subsidiary that owns Borrowing
Base Properties, provided that no such consent is required if (i) the Borrower
delivers prior written notice of such Disposition to the Administrative Agent at
 
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least thirty (30) days prior to the date of such Disposition, or such shorter
period of time agreed to by the Administrative Agent, specifying the Borrowing
Base Properties subject to such Disposition (and, in the case of a Disposition
of one hundred percent (100%) of the Equity Interests of any Restricted
Subsidiary, specifying the Equity Interests subject to such Disposition and the
Borrowing Base Properties owned by such Restricted Subsidiary), the proposed
closing date for such Disposition and the consideration to be received by the
Borrower and any Guarantors, as the case may be, as a result of such
Disposition, and (ii) the Credit Parties prepay the Borrowings pursuant to
Section 2.10(b) in an amount sufficient to eliminate any Borrowing Base
Deficiency as determined by the Required Lenders after the receipt of such
notice by the Administrative Agent and in such Lenders’ complete and sole
discretion using such methodologies, assumptions and discount rates as such
Lenders customarily use in assigning collateral value to Oil and Gas Interests
as of such date of determination;
 

 
1.21    Dispositions.  Clause (g) of Section 7.04 of the Credit Agreement shall
be and it hereby is amended in its entirety to read as follows:
 
(g)           except for Equity Interests of any Restricted Subsidiary that owns
Borrowing Base Properties, Dispositions of any assets not constituting Borrowing
Base Properties or the proceeds thereof;
 
1.22    Investments, Loans, Advances, Guarantees and Acquisitions.  Clause (p)
of Section 7.05 of the Credit Agreement shall be and it hereby is amended in its
entirety to read as follows:
 
(p)           investments in an aggregate amount not to exceed $15,000,000 at
any time outstanding made at any time prior to July 1, 2009 from the cash
proceeds of the equity issuance made by Borrower on or about February 15, 2008;
provided that, with respect to each investment made pursuant to this clause (p),
(i) at the time such investment is made, no Default or Event of Default shall
have occurred and be continuing or be caused by such investment and (ii) before
and immediately after giving effect to such investment, Borrowing Base Usage
(calculated by using the Borrowing Base rather than the Conforming Borrowing
Base, at any time prior to the Conforming Date) is not greater than 75%;
 
1.23    Investments, Loans, Advances, Guarantees and Acquisitions.  Clause (q)
of Section 7.05 of the Credit Agreement shall be and it hereby is amended in its
entirety to read as follows:
 
(q)           any other investments in any Person in an aggregate amount not to
exceed $60,000,000 at any time outstanding for all such investments; provided
that, with respect to each investment made pursuant to this clause (q), (i)
immediately after giving effect to such investment, the total outstanding amount
of investments made pursuant to this clause (q) with the proceeds of Loans shall
not exceed $50,000,000, (ii) at the time such investment is made, no Default or
Event of Default shall have occurred and be continuing or be caused by such
investment
 
 
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and (iii) before and immediately after giving effect to such investment,
Borrowing Base Usage (calculated by using the Borrowing Base rather than the
Conforming Borrowing Base, at any time prior to the Conforming Date) is not
greater than 75%; and
 
1.24    Investments, Loans, Advances, Guarantees and Acquisitions.  Section 7.05
of the Credit Agreement shall be and it hereby is amended by adding a new clause
(r) immediately following clause (q) to read as follows:
 

(r)           investments by the Borrower or any of its Restricted Subsidiaries
consisting of profit interests in Avista JV Partner acquired in connection with
the Marcellus Joint Venture and investments received by the Borrower or any of
its Restricted Subsidiaries in exchange for such profit interests in connection
with a merger, conversion, consolidation or other combination of Avista JV
Partner with another Person.
 
1.25    Restricted Payments.  Section 7.07 of the Credit Agreement shall be and
it hereby is amended in its entirety to read as follows:
 
Section 7.07.  Restricted Payments.  The Borrower will not, nor will it permit
any of its Restricted Subsidiaries to, declare or make, or agree to pay or make,
directly or indirectly, any Restricted Payment, except that (a) the Borrower may
declare and pay dividends with respect to its Equity Interests payable solely in
additional shares of its common stock, (b) any Restricted Subsidiary may make
Restricted Payments to the Borrower or any Guarantor, (c) the Borrower may make
cash payments in lieu of issuing fractional shares in an aggregate amount not
exceeding $200,000 during the term of this Agreement, (d) the Borrower may
declare and pay distributions effecting “poison pill” rights plans provided that
any securities or rights so distributed have a nominal fair market value at the
time of declaration, (e) the Borrower may make any mandatory or optional cash
payments or deliveries of the Borrower’s capital stock, or any combination
thereof, in settlement of its obligations under any Convertible Notes Documents
upon the conversion or required repurchase of any Convertible Notes thereunder,
and (f) the Borrower may make repurchases, redemptions or other acquisitions or
retirements for value of its Equity Interests (i) deemed to occur upon the
exercise of stock options or other rights to acquire Equity Interests of
Borrower if such Equity Interests represent a portion of the exercise or
exchange price thereof or (ii) to the extent of any withholding tax liability
incurred as a result of any exercise, vesting, grant or exchange of Equity
Interests of Borrower issued under any incentive plan adopted by the holders of
its Equity Interests, in accordance with such incentive plan; provided that (A)
at the time of such repurchase, redemption or other acquisition or retirement
for value, no Default or Event of Default has occurred and is continuing or
would be caused by such Restricted Payment and (B) such withholding tax is
remitted to the appropriate governmental authority within thirty (30) days after
such repurchase, redemption or other acquisition or retirement for value.
 
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1.26    Transactions with Affiliates.  Section 7.08 of the Credit Agreement
shall be and it hereby is amended in its entirety to read as follows:
 
Section 7.08.  The Borrower will not, nor will it permit any of its Restricted
Subsidiaries to, sell, lease or otherwise transfer any property or assets to, or
purchase, lease or otherwise acquire any property or assets from, or otherwise
engage in any other transactions with, any of its Affiliates, except (a) in the
ordinary course of business at prices and on terms and conditions not less
favorable to the Borrower or such Restricted Subsidiary than could be obtained
on an arm’s-length basis from unrelated third parties, (b) transactions between
or among the Borrower and its Restricted Subsidiaries not involving any other
Affiliate, (c) transactions described on Schedule 7.08, (d) any Restricted
Payment permitted by Section 7.07, (e) investments permitted under Section 7.05,
(f) with respect to any Person serving as an officer, director, employee or
consultant of the Borrower or any Restricted Subsidiary, (i) the payment of
reasonable compensation, benefits or indemnification liabilities in connection
with his or her services in such capacity provided that the payment of any such
compensation, benefits or indemnification liabilities are approved by a majority
of the disinterested members of the Board of Directors of the Borrower or by the
Compensation Committee of the Borrower, (iii) the making of advances for travel
or other business expenses in the ordinary course of business or (iii) such
Person’s participation in any benefit or compensation plan, (g) the repayment of
Indebtedness permitted under Section 7.01(c), and (h) transactions with Avista
or any of its Subsidiaries entered into in connection with the Marcellus Joint
Venture.
 
1.27    Restrictive Agreements.  Section 7.09 of the Credit Agreement shall be
and it hereby is amended in its entirety to read as follows:
 
Section 7.09.  Restrictive Agreements.  The Borrower will not, nor will it
permit any of its Restricted Subsidiaries to, directly or indirectly, enter
into, incur or permit to exist any agreement or other arrangement that
prohibits, restricts or imposes any condition upon (a) the ability of the
Borrower or any Restricted Subsidiary to create, incur or permit to exist any
Lien upon any of its property or assets (other than property or assets
consisting of (1) Equity Interests in any Unrestricted Subsidiary, (2) Equity
Interests of joint ventures permitted under Section 7.05(o), 7.05(p) or 7.05(q),
(3) investments permitted under Section 7.05(j) if such restriction or
conditions apply only to the property or assets that are the subject of such
investment and (4) unless the value of such Equity Interests are included in the
determination of the Borrowing Base, Equity Interests in Pinnacle permitted
under Section 7.05(l), and (5) profit interests in Avista JV Partner permitted
under Section 7.05(r)), or (b) the ability of any Restricted Subsidiary to pay
dividends or other distributions with respect to any of its Equity Interests or
to make or repay loans or advances to the Borrower or any Restricted Subsidiary
or to Guarantee Indebtedness of the Borrower or any Restricted Subsidiary;
provided that (i) the foregoing shall not apply to restrictions and conditions
imposed by law or by this Agreement, (ii) the foregoing shall not apply
 
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to restrictions and conditions set forth in the Second Lien Facility Documents,
(iii) the foregoing shall not apply to restrictions and conditions existing on
the date hereof identified on Schedule 7.09 (but shall apply to any extension or
renewal of, or any amendment or modification expanding the scope of, any such
restriction or condition), (iv) clause (a) of the foregoing shall not apply to
restrictions or conditions imposed by any agreement relating to secured
Indebtedness permitted by this Agreement (other than the Second Lien Facility)
if such restrictions or conditions apply only to the property or assets securing
such Indebtedness, (v) clause (a) of the foregoing shall not apply to customary
provisions in leases and other contracts restricting the assignment thereof
(other than oil, gas and mineral leases constituting Mortgaged Properties),
(vi) existing restrictions with respect to a Person acquired by the Borrower or
any of its Restricted Subsidiaries (except to the extent such restrictions were
put in place in connection with or in contemplation of such acquisition), which
restrictions are not applicable to any Person, or the properties or assets of
any Person, other than the Person, or the property or assets of the Person, so
acquired; and (vii) any restriction with respect to Equity Interests of a
Restricted Subsidiary imposed pursuant to an agreement entered into for the sale
or disposition of such Equity Interests or any restriction with respect to the
assets of a Credit Party imposed pursuant to an agreement entered into for the
sale or disposition of such assets or all or substantially all the Equity
Interests of such Restricted Subsidiary pending the closing of such sale or
disposition.
 

 
1.28    Leverage Ratio.  Section 7.12 of the Credit Agreement shall be and it
hereby is amended in its entirety to read as follows:
 
Section 7.12.  Financial Covenants.
 
(a)           Consolidated Current Ratio.  The Borrower will not permit the
Consolidated Current Ratio to be less than 1.00 to 1.00 at any time.  For
purposes of determining the Borrower’s compliance with this Section 7.12(a), the
Borrower’s options to acquire mineral interests and leases under agency
agreements (x) with independent third parties that are not Affiliates or
Subsidiaries of any Credit Party or (y) in connection with the Marcellus Joint
Venture will be excluded from the calculation of Consolidated Current
Liabilities.
 
(b)           Leverage Ratio.  The Borrower will not permit the ratio,
determined as of the end of any fiscal quarter ending on or after September 30,
2008, of (A) Total Net Debt as of the end of such fiscal quarter to (B)
Consolidated EBITDAX for the trailing four fiscal quarter period ending on such
date, to be greater than 4.00 to 1.00.  For purposes of determining the
Borrower’s compliance with this Section 7.12(b), Consolidated EBITDAX shall not
include the net revenue attributable to any assets that are subject to a Lien
granted to secure Non-Recourse Debt.
 
1.29    Marcellus JV Documents.  Article VII of the Credit Agreement shall be
and it hereby is amended by adding a new Section 7.16 to the end thereof to read
as follows:
 
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Section 7.16.  Marcellus JV Documents.  Without the Administrative Agent’s prior
written consent, the Borrower will not, nor will it permit any Restricted
Subsidiary to, enter into or permit any supplement, modification or amendment
of, or waive any right or obligation of any Person under, any Marcellus JV
Document if the effect thereof would be materially adverse to the Administrative
Agent and/or the Lenders.
 
1.30    Notices.  Subclause (ii) of Section 11.01(a) of the Credit Agreement
shall be and it hereby is amended in its entirety to read as follows:
 
(ii)           if to the Administrative Agent or Issuing Bank, to Guaranty Bank,
333 Clay Street, Suite 4400, Houston, Texas 77002, Telecopy No.: (713) 890-8868,
Attention:  Kelly L. Elmore III;
 
1.31    Waivers; Amendments.  Section 11.02 of the Credit Agreement shall be and
it hereby is amended by adding a new clause (c) to the end thereof to read as
follows:
 
(c)           Notwithstanding anything to the contrary contained in this Section
11.02, the Administrative Agent may, with the consent of the Borrower only,
amend, modify or supplement this Agreement or any of the other Loan Documents to
correct any clerical errors or cure any ambiguity, omission, mistake, defect or
inconsistency.
 
1.32    Governing Law; Jurisdiction; Consent to Service of Process.  Clause (b)
of Section 11.09 shall be and it hereby is amended in its entirety to read as
follows:
 
(b)           EACH CREDIT PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS,
FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY UNITED
STATES FEDERAL OR TEXAS STATE COURT SITTING IN HOUSTON, TEXAS IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR FOR RECOGNITION OR
ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH TEXAS STATE OR, TO THE EXTENT
PERMITTED BY LAW, IN SUCH FEDERAL COURT.  EACH OF THE PARTIES HERETO AGREES THAT
A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY LAW.  NOTHING IN THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT THE
ADMINISTRATIVE AGENT, THE ISSUING BANK OR ANY LENDER MAY OTHERWISE HAVE TO BRING
ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AGAINST ANY CREDIT PARTY OR
ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.
 
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1.33    Marshaling; Payments Set Aside.  Article XI of the Credit Agreement
shall be and it hereby is amended by adding a new Section 11.15 to the end
thereof to read as follows:
 
Section 11.15  Marshaling; Payments Set Aside.  Neither Administrative Agent nor
any Lender shall be under any obligation to marshal any assets in favor of any
Credit Party or any other Person or against or in payment of any or all of the
Obligations.  To the extent that any Credit Party makes a payment or payments to
Administrative Agent or any Lender, or Administrative Agent or any Lender
enforces any security interests or exercises their rights of setoff, and such
payment or payments or the proceeds of such enforcement or setoff or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside and/or required to be repaid to a trustee, receiver or any other party
under any bankruptcy law, any other state or federal law, common law or any
equitable cause, then, to the extent of such recovery, the obligation or part
thereof originally intended to be satisfied, and all Liens, rights and remedies
therefor or related thereto, shall be reinstated and continued in full force and
effect as if such payment or payments had not been made or such enforcement or
setoff had not occurred.
 
1.34    Amendment to Schedules.  Schedule 2.01, Schedule 4.13 and Schedule 7.02
to the Credit Agreement shall be and they hereby are amended in their respective
entireties and replaced with Schedule 2.01, Schedule 4.13 and Schedule 7.02
attached hereto.
 
1.35   Deletion of Schedule.  Schedule 4.18 of the Credit Agreement shall be and
it hereby is deleted and the reference to “Schedule 4.18 – Deposit and
Investment Accounts” located on the page immediately following the Table of
Contents shall be and it hereby is deleted.
 
1.36    Amendment to Exhibits.  Each of the Exhibits to the Credit Agreement
shall be and they hereby are amended by (a) deleting all references to “JPMorgan
Chase Bank, N.A.” or “JPMorgan Chase Bank, National Association” solely in its
capacity as Administrative Agent under the Credit Agreement and substituting in
lieu thereof the name “Guaranty Bank”.
 
1.37    Amendment to Exhibits. Exhibit E to the Credit Agreement shall be and it
hereby is deleted in its entirety and replaced with Exhibit E attached hereto
and the reference to “Exhibit E – Form of Intercreditor Agreement Amendment”
located on the page immediately following the Table of Contents shall be and it
hereby is deleted in its entirety and replaced with the phrase “Exhibit E – Form
of Lender Certificate”.
 
1.38    Redetermined Borrowing Base and Conforming Borrowing Base.  This
Amendment shall constitute notice of the Redetermination of the Borrowing Base
and the Conforming Borrowing Base pursuant to Section 3.06 of the Credit
Agreement, and the Successor Agent, the Lenders and the Borrower hereby
acknowledge that effective as of Seventh Amendment Effective Date, the Borrowing
Base is $250,000,000, the Conforming Borrowing Base is $215,000,000 and the
Monthly Reduction is $0.00.
 
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SECTION 2. New Lenders and Reallocation of Commitments and Loans.  The Lenders
have agreed among themselves to reallocate their respective Applicable
Percentages of the Aggregate Commitment and to, among other things, allow
certain financial institutions identified by Guaranty Bank, in its capacity as
Lead Arranger, in consultation with Borrower, to become a party to the Credit
Agreement as a Lender (each, a “New Lender”) by acquiring an interest in the
Aggregate Commitment.  The Successor Agent and Borrower hereby consent to such
reallocation and to each New Lender’s acquisition of an interest in the
Aggregate Commitment.  On the Seventh Amendment Effective Date and after giving
effect to such reallocation of the Aggregate Commitment, the Applicable
Percentage of each Lender shall be as set forth on Schedule 2.01 of this
Amendment.  With respect to such reallocation, each New Lender shall be deemed
to have acquired its Commitment from each of the other Lenders pursuant to the
terms of the Assignment and Assumption attached as Exhibit A to the Credit
Agreement as if such New Lender and the other Lenders had executed an Assignment
and Assumption with respect to such allocation.  Borrower and the Successor
Agent hereby consent to such assignment to the New Lenders.  To the extent
requested by any Lender or by JPMorgan Chase Bank, N.A. or Bank of Scotland plc
(each a “Departing Lender” and collectively, the “Departing Lenders”) in
accordance with Section 2.15 of the Credit Agreement, the Borrower shall pay to
such Lender or Departing Lender, within the time period prescribed by Section
2.15 of the Credit Agreement, any amounts required to be paid by the Borrower
under Section 2.15 of the Credit Agreement in the event the payment of any
principal of any Eurodollar Loan, the conversion of any Eurodollar Loan, or the
assignment of any Eurodollar Loan by any Departing Lender other than on the last
day of an Interest Period applicable thereto is required in connection with the
reallocation contemplated by this Section 2 or the assignments contemplated in
Section 7.9 of this Amendment.
 
SECTION 3.  Resignation and Appointment of Administrative Agent and Issuing
Bank.
 
3.1    Resignation of Resigning Agent and Resigning Issuing Bank.
 
(a)           Pursuant to ARTICLE X of the Credit Agreement, the Resigning Agent
hereby resigns as Administrative Agent under the Credit Agreement upon the
effectiveness of this Amendment.  Upon the effectiveness of such resignation,
the Resigning Agent shall be discharged from its duties and obligations as
Administrative Agent under the Credit Agreement and the other Loan
Documents.  Notwithstanding such resignation and the assignment contained in
Section 4.1 of this Amendment, the provisions of ARTICLE X and Section 11.03 of
the Credit Agreement shall continue in effect for the benefit of the Resigning
Agent in respect of any action taken or omitted to be taken by it while it was
acting as the Administrative Agent under the Credit Agreement and the other Loan
Documents.
 
(b)           Pursuant to Section 2.05(i) of the Credit Agreement, the Resigning
Issuing Bank hereby resigns as Issuing Bank under the Credit Agreement upon the
effectiveness of this Amendment.  Upon the effectiveness of such resignation,
the Resigning Issuing Bank shall be discharged from its duties and obligations
as Issuing Bank under the Credit Agreement and the other Loan
Documents.  Notwithstanding such resignation, the provisions of Section 11.03 of
the Credit Agreement shall continue in effect for the benefit of the Resigning
Issuing Bank in respect of any action taken or omitted to be taken by it while
it was acting as the Issuing Bank under the Credit Agreement and the other Loan
Documents.
 
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3.2    Appointment of Successor Agent and Successor Issuing Bank.
 
(a)           Pursuant to ARTICLE X of the Credit Agreement, the Lenders hereby
appoint the Successor Agent as Administrative Agent under the Credit Agreement
and the other Loan Documents.  By its execution hereof, the Successor Agent
hereby accepts such appointment and by its acceptance of such appointment, the
Successor Agent hereby succeeds to and becomes vested with all the rights,
powers, privileges and duties of the Resigning Agent in its capacity as
Administrative Agent under the Credit Agreement.  Notwithstanding the
appointment of the Successor Agent as Administrative Agent, Guaranty Bank, as a
Lender, shall have the same rights and powers under the Credit Agreement and any
other Loan Document with respect to its Commitment and its Loans as any other
Lender and may exercise the same as though it were not the Administrative
Agent.  In addition, the term “Lender” or “Lenders” in the Credit Agreement or
any other Loan Document shall, at any time when Guaranty Bank is a Lender,
unless the context otherwise indicates, include the Successor Agent in its
individual capacity.
 
(b)           Pursuant to Section 2.05(i) of the Credit Agreement, the Borrower
and the Successor Agent hereby appoint the Successor Issuing Bank as Issuing
Bank under the Credit Agreement and the other Loan Documents.  By its execution
hereof, the Successor Issuing Bank hereby accepts such appointment and by its
acceptance of such appointment, the Successor Issuing Bank hereby succeeds to
and becomes vested with all the rights, powers, privileges and duties of the
Issuing Bank under the Credit Agreement with respect to any Letters of Credit
issued on or after the Seventh Amendment Effective Date.
 
SECTION 4.  Assignment
 
4.1    Resigning Agent Assignment.  Upon the effectiveness of this Amendment,
the Resigning Agent, solely in its capacity as Administrative Agent under the
Credit Agreement, hereby transfers, assigns, conveys and delivers, as of the
Seventh Amendment Effective Date, to the Successor Agent, for the benefit of
itself and the Secured Parties, all of the Resigning Agent’s, right, title and
interest in, to and under (i) the Credit Agreement and the other Loan Documents,
(ii) any and all collateral granted to the Resigning Agent, for the benefit of
the Secured Parties, under any Loan Document and (iii) all proceeds of any and
all of the foregoing (collectively, the “Assigned Items”); provided that the
Resigning Agent expressly reserves all of its rights and benefits provided to it
under ARTICLE X and Section 11.03 of the Credit Agreement.  The Assigned Items
are being assigned and transferred by the Resigning Agent to the Successor Agent
without recourse and except as expressly provided in Section 4.2 of this
Amendment, without representation or warranty, express or implied, by the
Resigning Agent.
 
4.2    Representations and Warranties.
 
(a)           The Resigning Agent represents and warrants to the Successor Agent
that (i) the Resigning Agent is, in all material respects, the owner and holder
of the Assigned Items, (ii) the Assigned Items are, in all material respects,
free and clear of any lien, encumbrance or other adverse claim and (iii) the
Resigning Agent has full right, power and authority to transfer to the Successor
Agent all of the Assigned Items and to execute and deliver this Amendment.
 
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(b)           The Successor Agent represents and warrants to the Resigning Agent
that (i) the Successor Agent has full right, power and authority to assume the
Assigned Items and to execute and deliver this Amendment and (ii) the Successor
Agent has made an independent decision to enter into this Amendment and to
assume the Assigned Items, without reliance on any representation or warranty by
the Resigning Agent, other than those representations and warranties expressly
set forth herein.
 
(c)           Each Credit Party represents and warrants to the Resigning Agent
and the Successor Agent that as of the Seventh Amendment Effective Date, both
before and immediately after giving effect to this Amendment, such Credit Party
has no right of setoff, defense or counterclaim against the enforcement of the
Assigned Items.
 
4.3    UCC Financing Statements.  The Resigning Agent and each Credit Party
hereby authorizes the Successor Agent to file UCC financing statement amendments
and other assignment documents assigning all of the Resigning Agent’s right,
title and interest in, to and under the Assigned Items to the Successor Agent.
 
4.4    Collateral.  The Resigning Agent shall, at the Credit Parties’ expense,
promptly, but in any event within ten (10) Business Days after the Seventh
Amendment Effective Date, deliver to the Successor Agent all of the collateral
in the possession or control of the Resigning Agent, solely in its capacity as
administrative agent for the Lenders under the Credit Agreement, including,
without limitation, any stock certificates (together with stock powers with
respect thereto) held by the Resigning Agent in connection with the Credit
Agreement and any other Loan Documents.
 
4.5    Modification of Mortgages.  Within thirty (30) days after the Seventh
Amendment Effective Date (or such longer time as is acceptable to the Successor
Agent in its sole discretion), the Resigning Agent and each Credit Party agrees
to deliver to the Successor Agent assignments and/or amendments to each of the
Mortgages as shall be reasonably requested by the Successor Agent to evidence
the assignment of the Resigning Agent’s right, title and interest in, to and
under the Mortgages to the Successor Agent, duly executed by the Resigning
Agent, the Successor Agent and the appropriate Credit Parties and in form and
substance reasonably satisfactory to the Successor Agent.
 
4.6    Insurance Certificates.  Within thirty (30) days after the Seventh
Amendment Effective Date (or such longer time as is acceptable to the Successor
Agent in its sole discretion), Borrower shall deliver to the Successor Agent (a)
copies of standard insurance certificates issued to Successor Agent evidencing
the insurance coverage required to be maintained by the Credit Parties pursuant
to Section 6.05 of the Credit Agreement and (b) standard endorsements in favor
of the Successor Agent naming the Successor Agent as additional insured with
respect to all liability insurance policies and loss payee with respect to all
casualty and property insurance policies, in the case of each of clauses (a) and
(b), in form and substance reasonably satisfactory to the Successor Agent.
 
4.7    Further Assurance.  The Resigning Agent agrees from time to time, at the
Credit Parties’ expense, to do such further acts and things, and to execute and
deliver such additional conveyances, assignments, agreements, instruments and
filings that the Successor Agent may at
 
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any time reasonably deem necessary or desirable to carry out the intent and
purposes set forth in Section 3 and Section 4 of this Amendment.
 
SECTION 5.  Consents.
 
5.1    Appointment of Guaranty Bank as Successor Agent.  Each Credit Party
hereby consents to the appointment by the Lenders of the Successor Agent as
Administrative Agent under the Credit Agreement and the other Loan Documents
pursuant to Section 3 of this Amendment.
 
5.2    Appointment of Guaranty Bank as Successor Issuing Bank.  Each Lender
hereby consents to the appointment by the Borrower and the Successor Agent of
the Successor Issuing Bank as Issuing Bank under the Credit Agreement and the
other Loan Documents pursuant to Section 3 of this Amendment.
 
5.3    Assignment.  Each Lender and each Credit Party hereby consents to the
assignment of the Assigned Items by the Resigning Agent to the Successor Agent
pursuant to Section 4 of this Amendment.
 
5.4    Termination of JPMorgan Swap Agreements.  Each Lender hereby consents to
the termination, cancellation or novation of each of the JPMorgan Swap
Agreements (as defined below).
 
SECTION 6.  Limited Waiver.  The Successor Agent and the Lenders, on a one-time
basis only and upon the satisfaction of the conditions precedent listed in
Section 7 hereof, hereby waive the Specified Event of Default.  Notwithstanding
the foregoing, the execution of this Amendment shall not be deemed to be (x)
except with respect to the Specified Event of Default, a waiver of, or consent
by the Successor Agent, the Resigning Agent or any Lender to, any Default or
Event of Default which may exist or hereafter occur under the Credit Agreement
or any other Loan Document, (y) a waiver of any Credit Party’s obligations under
the Credit Agreement or any other Loan Document, or (z) a waiver of any rights,
remedies, offsets, claims, or other causes of action that the Successor Agent,
the Resigning Agent, the Resigning Issuing Bank or any Lender may have against
any Credit Party under the Credit Agreement and the other Loan Documents, all of
which rights the Successor Agent, the Resigning Agent, the Resigning Issuing
Bank and the Lenders specifically reserve.
 
SECTION 7.  Conditions.  The amendments to the Credit Agreement contained in
Section 1 of this Amendment, the assignment and reallocations contained in
Section 2 of this Amendment, the appointment of a successor administrative agent
and successor issuing bank contained in Section 3 of this Amendment, the
assignment contained in Section 4 of this Amendment, the consents contained in
Section 5 of this Amendment and the limited waiver contained in Section 6 of
this Amendment shall become effective upon the satisfaction of each of the
conditions set forth in this Section 7.
 
7.1    Execution and Delivery.  Each Credit Party, the Lenders, the Resigning
Agent, the Resigning Issuing Bank, the Successor Agent and the Successor Issuing
Bank shall have executed and delivered this Amendment.
 
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7.2    No Default.  After giving effect to the limited waiver contained in
Section 6 of this Amendment, no Default shall have occurred and be continuing or
shall result from the effectiveness of this Amendment.
 
7.3    Fees.  Borrower and Successor Agent shall have executed and delivered a
fee letter in connection with this Amendment and Borrower shall have paid to the
Successor Agent, for the benefit of the Lenders (including the New Lenders), all
fees payable under such fee letter at the time this Amendment becomes effective.
 
7.4    Notes.  Borrower shall have executed and delivered a replacement
promissory note to Guaranty Bank and a promissory note to each New Lender that
has requested a promissory note in accordance with Section 2.08(e) of the Credit
Agreement.
 
7.5    Carrizo Marcellus.  The Borrower shall have complied, and shall have
caused Carrizo Marcellus to comply, with Sections 6.13 and 6.14 of the Credit
Agreement with respect to Carrizo Marcellus, including, without limitation, the
execution and delivery of a Counterpart Agreement (it being understood that this
condition may be satisfied substantially contemporaneously with the
effectiveness of this Amendment).
 
7.6    Marcellus Holdings.  The Borrower shall have complied, and shall have
caused Marcellus Holdings to comply, with Sections 6.13 and 6.14 of the Credit
Agreement with respect to Marcellus Holdings, including, without limitation, the
execution and delivery of a Counterpart Agreement and Pledge Agreement (it being
understood that this condition may be satisfied substantially contemporaneously
with the effectiveness of this Amendment).
 
7.7    Authorization and Good Standing.  The Successor Agent shall have received
such documents and certificates as the Successor Agent or its counsel may
reasonably request relating to the organization, existence and good standing of
each Credit Party, the authorization of this Amendment and any other legal
matters relating to the Credit Parties or this Amendment, all in form and
substance reasonably satisfactory to the Successor Agent and its counsel.
 
7.8    Legal Opinion.  The Successor Agent shall have received a favorable
written opinion (addressed to the Successor Agent and the Lenders and dated the
Seventh Amendment Effective Date) of Baker Botts L.L.P., counsel for the Credit
Parties, in form and substance reasonably satisfactory to the Successor
Agent.  The Credit Parties hereby request such counsel to deliver such opinion.
 
7.9    Assignment.  The Successor Agent shall have received a duly executed copy
of (a) a certain Assignment and Assumption dated as of the Seventh Amendment
Effective Date among JPMorgan Chase Bank, N.A., as assignor, and Guaranty Bank,
as assignee, pursuant to which JPMorgan Chase Bank, N.A. shall have assigned all
of its rights and obligations as a Lender under the Credit Agreement to Guaranty
Bank and (b) a certain Assignment and Assumption dated as of the Seventh
Amendment Effective Date among Bank of Scotland plc, as assignor, and Guaranty
Bank, as assignee, pursuant to which Bank of Scotland plc shall have assigned
all of its rights and obligations as a Lender under the Credit Agreement to
Guaranty Bank, and in the case of the Assignment and Assumption referenced in
clause (a) above only, the
 
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Resigning Agent shall have received from Guaranty Bank the $3,500 processing and
recordation fee required by Section 11.04(b) of the Credit Agreement.
 
7.10    Fees to Resigning Issuing Bank.  Borrower shall have paid to the
Resigning Issuing Bank all accrued and unpaid fronting fees owed to the
Resigning Issuing Bank pursuant to Section 2.11(b) of the Credit Agreement (as
in effect immediately prior to the effectiveness of this Amendment).
 
7.11    JPMorgan Swap Agreements.  With respect to each Swap Agreement entered
into with JPMorgan Chase Bank, N.A. or any of its Affiliates and in effect
immediately prior to the Seventh Amendment Effective Date (collectively,
“JPMorgan Swap Agreements” and, individually, a “JPMorgan Swap Agreement”),
Borrower shall, at Borrower’s expense and on terms and conditions satisfactory
to JPMorgan Chase Bank, N.A. and such Affiliates, either (a) terminate each
existing hedge transaction under such JPMorgan Swap Agreement and pay in full
any and all Indebtedness and liabilities owed to JPMorgan Chase Bank, N.A.
arising from such termination or (b) novate each existing hedge transaction
under such JPMorgan Swap Agreement on terms and conditions reasonably
satisfactory to JPMorgan Chase Bank, N.A.
 
7.12    Other Documents.  The Successor Agent, the Resigning Agent and the
Resigning Issuing Bank shall have received such other instruments and documents
incidental and appropriate to the transaction provided for herein as the
Successor Agent, the Resigning Agent, the Resigning Issuing Bank or their
special counsel may reasonably request prior to the date hereof, and all such
documents shall be in form and substance reasonably satisfactory to the
Successor Agent.
 
SECTION 8.  Representations and Warranties of Borrower.  To induce the Lenders
to enter into this Amendment, each Credit Party hereby represents and warrants
to the Lenders as follows:
 
8.1    Reaffirmation of Representations and Warranties/Further
Assurances.  After giving effect to the amendments herein, each representation
and warranty of such Credit Party contained in the Credit Agreement or in any of
the other Loan Documents is true and correct in all material respects as of the
date hereof (except to the extent such representations and warranties
specifically refer to an earlier date).
 
8.2    Corporate Authority; No Conflicts.  The execution, delivery and
performance by such Credit Party (to the extent a party hereto or thereto) of
this Amendment and all documents, instruments and agreements contemplated herein
are within such Credit Party’s corporate or other organizational powers, have
been duly authorized by all necessary action, require no action by or in respect
of, or filing with, any court or agency of government and do not violate or
constitute a default under any provision of any applicable law or other
agreements binding upon such Credit Party or result in the creation or
imposition of any Lien upon any of the assets of such Credit Party except for
Permitted Liens and otherwise as permitted in the Credit Agreement.
 
8.3    Enforceability.  This Amendment constitutes the valid and binding
obligation of such Credit Party enforceable in accordance with its terms, except
as (i) the enforceability
 
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thereof may be limited by bankruptcy, insolvency or similar laws affecting
creditor’s rights generally, and (ii) the availability of equitable remedies may
be limited by equitable principles of general application.
 
8.4    Letters of Credit.  As of the Seventh Amendment Effective Date, both
before and after giving effect to the consummation of the transactions
contemplated herein, there are no outstanding Letters of Credit and the
aggregate LC Exposure of all Lenders is $0.00.
 
SECTION 9.  Miscellaneous.
 
9.1    Reference to and Effect on the Loan Documents.  Upon the effectiveness of
this Amendment, on and after the date hereof, each reference in the Credit
Agreement (including the schedules and exhibits thereto) and the other Loan
Documents to “JPMorgan Chase Bank, N.A.” or “JPMorgan Chase Bank, National
Association” solely in its capacity as Administrative Agent, Collateral Agent
and/or Issuing Bank shall be deemed to refer to “Guaranty Bank”.
 
9.2    Reaffirmation of Loan Documents and Liens.  Any and all of the terms and
provisions of the Credit Agreement and the Loan Documents shall, except as
amended and modified hereby, remain in full force and effect.  Each Credit Party
hereby agrees that nothing contained in this Amendment shall in any manner
affect or impair the liabilities, duties and obligations of such Credit Party
under the Credit Agreement and the other Loan Documents or the Liens securing
the payment and performance thereof.
 
9.3    Parties in Interest.  All of the terms and provisions of this Amendment
shall bind and inure to the benefit of the parties hereto and their respective
successors and assigns.
 
9.4    Legal Expenses.  Borrower hereby agrees to pay all reasonable fees and
expenses of special counsel to the Successor Agent, the Resigning Agent, the
Resigning Issuing Bank and JPMorgan Chase Bank, N.A., in its capacity as a
Lender and as a Lender Counterparty, incurred by such parties in connection with
the preparation, negotiation and execution of this Amendment and all related
documents (including, without limitation, all reasonable out-of-pocket expenses
incurred by the Successor Agent or its counsel in connection with the recording
and filing of assignments and/or amendments to Mortgages and UCC-1 financing
statements).
 
9.5    Further Assurances.  Each Credit Party covenants and agrees from time to
time, as and when requested by the Successor Agent, the Resigning Agent, the
Resigning Issuing Bank or the Lenders, to execute and deliver or cause to be
executed or delivered, all such documents, instruments and agreements and to
take or cause to be taken such further or other action as the Successor Agent,
the Resigning Agent, the Resigning Issuing Bank or the Lenders, as the case may
be, may reasonably deem necessary or desirable in order to carry out the intent
and purposes of this Amendment.
 
9.6    Counterparts.  This Amendment may be executed in one or more counterparts
and by different parties hereto in separate counterparts each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.  Delivery of photocopies of the signature pages to this Amendment by
facsimile or
 
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electronic mail shall be effective as delivery of manually executed counterparts
of this Amendment.
 
9.7    Headings.  The headings, captions and arrangements used in this Amendment
are, unless specified otherwise, for convenience only and shall not be deemed to
limit, amplify or modify the terms of this Amendment, nor affect the meaning
thereof.
 
9.8    Governing Law.  This Amendment shall be construed in accordance with and
governed by the law of the State of Texas.
 
9.9    Complete Agreement.  THIS AMENDMENT, THE CREDIT AGREEMENT, AND THE OTHER
LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR ORAL AGREEMENTS OF THE
PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
 
 
[Remainder of page intentionally blank]
 
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IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed
by their respective authorized officers to be effective as of the date first
above written.
 
 
BORROWER:
 
CARRIZO OIL & GAS, INC.
 
 
 
By:       /s/Paul F. Boling
Name:  Paul F. Boling
Title:  Vice President and Chief Financial Officer
 
 
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GUARANTORS:
 
CCBM, INC.
 
 
By:       /s/Paul F. Boling
Name:  Paul F. Boling
Title:  Vice President
 
CLLR, INC.
 
 
By:       /s/Paul F. Boling
Name:  Paul F. Boling
Title:  Vice President
 
HONDO PIPELINE, INC.
 
 
By:       /s/Paul F. Boling
Name:  Paul F. Boling
Title:  Vice President
 
CARRIZO (MARCELLUS) LLC
 
 
By:       /s/Paul F. Boling
Name:  Paul F. Boling
Title:  Vice President
 
CARRIZO MARCELLUS HOLDING INC.
 
 
By:       /s/Paul F. Boling
Name:  Paul F. Boling
Title:  Vice President
 
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SUCCESSOR AGENT, SUCCESSOR
ISSUING BANK AND LENDER:
 
GUARANTY BANK, as Successor Agent,
Successor Issuing Bank and as a Lender
 

By:       /s/Kelly L. Elmore
III                                                         
Name:  Kelly L. Elmore III
Title:     Senior Vice President
 
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RESIGNING AGENT AND RESIGNING
ISSUING BANK:
 
JPMORGAN CHASE BANK, N.A., as
Resigning Agent and Resigning Issuing Bank
 

By:       /s/Kimberly Coil
Name:  Kimberly Coil
Title:     Vice President
 
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U.S. BANK NATIONAL ASSOCIATION,
as a Co-Agent and as a Lender
 
 
By:        /s/Justin M. Alexander
Name:  Justin M. Alexander
Title:    Vice President

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ROYAL BANK OF CANADA,
as a Co-Agent and as a Lender
 
 
By:       /s/Don J. McKinnerney
Name:  Don J. McKinnerney
Title:     Authorized Signatory

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CAPITAL ONE, N.A.,
as a Co-Agent and as a Lender
 
 
By:       /s/Paul D. Hein
Name:  Paul D. Hein
Title:     Vice President
 
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CREDIT SUISSE,
as a Lender
 

By:       /s/Vanessa Gomez
Name:  Vanessa Gomez
Title:    Director

By:       /s/Nupur Kumar
Name:  Nupur Kumar
Title:     Associate

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FORTIS CAPITAL CORP.,
as a Lender

 
By:      /s/Michele Jones
Name: Michele Jones
Title:   Director

 
By:      /s/Darrell Holley
Name: Darrell Holley
Title:   Managing Director
 
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SCHEDULE 2.01
 
APPLICABLE PERCENTAGES AND COMMITMENTS
 
 
Lender
Title
Applicable Percentage
Commitment1
Maximum
Facility Amount
Guaranty Bank
333 Clay Street
Suite 4400
Houston, TX  77002
Attention: Kelly L. Elmore III
Telephone: (713) 890-8849
Facsimile: (713) 890-8868
kelly.elmore@guarantybank.com
Administrative Agent
33.7078652%
$75,000,000
$168,539,325.84
U.S. Bank National Association
950 17th St., DNCOT8E
Denver, CO  80202
Attention:  Justin M. Alexander
Telephone:  (303) 585-4201
Facsimile:  (303) 585-4362
justin.alexander@usbank.com
 
With a copy to:
 
U.S. Bank
555 SW Oak, PDORP7LS
Attention:  Tony Wong
Telephone:  (503) 275-3252
Facsimile:  (503) 973-6900
tony.wong@usbank.com
Co-Agent
15.7303370%
$35,000,000
$78,651,685.39

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1As of Seventh Amendment Effective Date and subject to adjustment as a result of
a reduction or increase in the Aggregate Commitment pursuant to Section 2.02 and
Section 2.02A of the Credit Agreement, respectively, or a change in the
Borrowing Base.
 
Seventh Amendment to Credit Agreement
Schedule 2.01

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Royal Bank of Canada
3900 Williams Tower
2800 Post Oak Blvd.
Houston, Texas  77056
Attention: Don McKinnerney
Telephone: (713) 403-5607
Facsimile: (713) 403-5624
don.mckinnerney@rbccm.com
Co-Agent
15.7303370%
$35,000,000
$78,651,685.39
Capital One, N.A.
5718 Westheimer, Suite 1430
Houston, Texas  77057
Attention: Paul Hein
Telephone: (713) 435-7461
Facsimile: (713) 435-7106
paul.hein@capitalonebank.com
 
Co-Agent
15.7303370%
$35,000,000
$78,651,685.39
Credit Suisse
Eleven Madison Avenue
New York, New York  10010
Attention: Vanessa Gomez
Telephone: (212) 538-2993
Facsimile: (212) 448-3755
Vanessa.gomez@credit-suisse.com
 
With a copy to:
 
Credit Suisse
One Madison Avenue
New York, New York  10010
Attention: Loan Closers
Telephone: (212) 325-9041
Facsimile: (212) 538-9120
loan.closers@credit-suisse.com
Participant
11.2359551%
$25,000,000
$56,179,775.28

 
Seventh Amendment to Credit Agreement
Schedule 2.01

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Fortis Capital Corp.
15455 North Dallas Parkway
Suite 1400
Addison, TX  75001
Attention: Michele Jones
Telephone: (214) 953-9303
Facsimile: (214)754-5982
Michele.jones@us.fortis.com
 
Participant
7.8651685%
$17,500,000
$39,325,842.70
TOTAL
 
100.00%
$222,500,000
$500,000,000

 
Seventh Amendment to Credit Agreement
Schedule 2.01

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SCHEDULE 4.13
 

 
CAPITALIZATION
 
Legal Name
Jurisdiction of Organization
Shares of Capital Stock Outstanding
Owners of Shares of Capital Stock Outstanding
Tax Identification Number
Carrizo Oil & Gas, Inc.
 
(Borrower)
Texas
N/A
N/A
76-0415919
CCBM, Inc.
 
(Restricted Subsidiary)
Delaware
1,000 shares of common stock
100% - Carrizo Oil & Gas, Inc.
76-0685601
Hondo Pipeline, Inc.
(Restricted Subsidiary)
Delaware
1,000 shares of common stock
100% - Carrizo Oil & Gas, Inc.
26-1309563
CLLR, Inc.
(Restricted Subsidiary)
Delaware
1,000 shares of common stock
100% - Carrizo Oil & Gas, Inc.
20-5154104
Carrizo (Marcellus) LLC
(Restricted Subsidiary)
Delaware
limited liability company interests
100% - Carrizo Marcellus Holding Inc.
26-3529055
Carrizo Marcellus Holding Inc.
 
(Restricted Subsidiary)
Delaware
1000 shares of common stock
100% - Carrizo Oil & Gas, Inc.
26-3528920

 
Seventh Amendment to Credit Agreement
Schedule 4.13

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SCHEDULE 7.02
 
EXISTING LIENS
 
 
Liens arising under that certain Security Agreement dated as of October 12, 2004
made by the Borrower in favor of Deutsche Bank Securities, Inc., which Liens
encumber certain claims originally held by the Borrower against Enron North
America Corp. and Enron Corp., each in the amount of $1,096,056.00, claim
numbers 2536 and 2576, respectively, in the bankruptcy cases of Enron Corp., et
al., pending in the United States Bankruptcy Court for the Southern District of
New York, and all proceeds thereof.
 
Seventh Amendment to Credit Agreement
Schedule 7.02

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EXHIBIT E

FORM OF LENDER CERTIFICATE

 

 
________, 20___

 
 
To:        GUARANTY BANK,
 as Administrative Agent
 
The Borrower, the Guarantors, the Administrative Agent and the Lenders have
entered into that certain Credit Agreement dated as of May 25, 2006 (as the same
has been and may hereafter be amended, restated, supplemented or otherwise
modified from time to time, the “Credit Agreement”).  Unless otherwise defined
herein, capitalized terms used herein have the meaning specified in the Credit
Agreement.
 
[Language for Existing Lender]
 
[           Please be advised that the undersigned has agreed (a) to increase
its Commitment under the Credit Agreement effective __________, 20__ (the
“Effective Date”) from $________________ to $____________ and (b) that, from and
after the Effective Date, it shall continue to be a Lender in all respects under
the Credit Agreement and the other Loan Documents.]
 
[Language for New Lender]
 
[           Please be advised that the undersigned has agreed (a) to become a
Lender under the Credit Agreement effective __________, 20__ (the “Effective
Date”) with a Commitment of $____________ and (b) that, from and after the
Effective Date, it shall be deemed to be a Lender in all respects under the
Credit Agreement and the other Loan Documents.]
 
Very truly yours,

By:                                                                         
Name:
Title:
 
Seventh Amendment to Credit Agreement
Exhibit E

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Accepted and Agreed:
 

 
GUARANTY BANK,
as Administrative Agent
 

 

 
By:                                                                
Name:
Title:
 
Accepted and Agreed:
 
CARRIZO OIL & GAS, INC.
 
By:                                                                
Name:
Title:
 
Seventh Amendment to Credit Agreement
Exhibit E

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Guaranty
Bank

 
CREDIT AGREEMENT
 
dated as of
May 25, 2006
 
among
 
CARRIZO OIL & GAS, INC.
as Borrower
 
CERTAIN SUBSIDIARIES OF BORROWER,
as Guarantors
 
The Lenders Party Hereto
 
GUARANTY BANK,
as Administrative Agent, Sole Bookrunner and Lead Arranger
 
and
 
U.S. BANK NATIONAL ASSOCIATION, ROYAL BANK OF CANADA
AND CAPITAL ONE, N.A.,
as Co-Agents
 
 
$500,000,000 Senior Secured Revolving Credit Facility
 
 

Seventh Amendment to Credit Agreement
Annex A

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