EXHIBIT 10.2
 
Execution Copy
 

PARTICIPATION AGREEMENT
 
THIS PARTICIPATION AGREEMENT, among Carrizo (Marcellus) LLC, a Delaware limited
liability company (“Carrizo”), Carrizo Oil & Gas, Inc., a Texas corporation
(“COGI” and, together with Carrizo, the “Carrizo Parties”), Avista Capital
Partners II, L.P., a Delaware limited partnership (“Avista”), and ACP II
Marcellus LLC, a Delaware limited liability company (“Investor LLC” and,
together with Avista, the “Avista Parties”), is entered into this 3rd day of
November, 2008 (the “Execution Date”), effective as of the 1st day of August,
2008 (except as otherwise expressly provided herein) (the “Effective Date”).  In
this Agreement, Carrizo, COGI, Avista and Investor LLC are collectively referred
to as the “Parties” and each as a “Party.”
 
RECITALS:
 
A.           The Carrizo Parties and Investor LLC have agreed to dedicate their
respective interests in certain Oil and Gas Interests for the mutual benefit of
Carrizo and Investor LLC.
 
B.           COGI and Investor LLC are parties to that certain Agreement, dated
as of August 1, 2008 (the “Land Bank Agreement”), whereby, among other things,
COGI agreed to act as Investor LLC’s agent with respect to the acquisition of
oil, gas and mineral interests/leases in the geologic play area commonly known
as the Marcellus Shale in Maryland, New York, Pennsylvania, Virginia and West
Virginia (the “Designated Area”), and Investor LLC agreed to purchase such
leases for a total consideration not to exceed, in any event, Thirty Million
Dollars ($30,000,000) in the aggregate.
 
C.           Concurrently with the execution hereof, Carrizo and Investor LLC
are entering into that certain Operating Agreement, effective as of the
Effective Date (the “Operating Agreement”), which governs, to the extent not
otherwise provided in this Agreement, the joint operation of the Properties and
memorializes the agreement between Carrizo and Investor LLC to share certain
revenues and expenses related to the exploration, development and operation of
such dedicated Oil and Gas Interests.
 
D.           Concurrently with the execution hereof, Carrizo Marcellus Holding
Inc., a Delaware corporation and wholly owned Subsidiary of COGI (“Carrizo
Holding”), ACP II AMS LP, a Delaware limited partnership and wholly owned
Subsidiary of Avista (“ACP II”), and ACP II AMS (Offshore) LP, a Delaware
limited partnership and wholly owned Subsidiary of Avista (“ACP II Offshore”),
are entering into that certain Amended and Restated Limited Liability Company
Agreement of ACP II Marcellus LLC (the “Investor LLC Agreement”), effective as
of the Effective Date, whereby, among other things, Carrizo Holding is being
issued an interest in Investor LLC having the rights and preferences described
in the Investor LLC Agreement as the “Profit Interest.”
 
E.           The Parties intend that Investor LLC shall bear all the initial
expenses under the Operating Agreement and also receive a preferred return on
capital contributed by it to pay such expenses, and Carrizo shall contribute a
portion of the profits it would otherwise be entitled to receive under this
Agreement in exchange for the issuance of the Profit Interests.
 

 
 

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NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the Parties agree as follows:
 
ARTICLE 1
 
DEFINITIONS
 
“ACP II” means ACP II AMS LP, a Delaware limited partnership.
 
“ACP II Offshore” means ACP II AMS (Offshore) LP, a Delaware limited
partnership.
 
“Affiliate” means any Person that, directly or indirectly, or through one or
more intermediaries controls, is controlled by, or is under common control with
another Person.  For the purposes of this Agreement, “control” means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management of a Person, whether through the ownership of voting
securities or by contract, agency, or otherwise.  Notwithstanding the foregoing,
COGI and its Subsidiaries and other Affiliates shall not be deemed to be
Affiliates of Avista or any of its Subsidiaries or its other Affiliates, and
vice versa.
 
“Agreement” means this Participation Agreement.
 
“AMI” has the meaning set forth in the Operating Agreement.
 
“Avista” means Avista Capital Partners II, L.P., a Delaware limited partnership.
 
“Avista Allocation Threshold” means the first time that (a) the aggregate
amounts of Net Cash Flow From Production allocated to Investor LLC pursuant to
Section 3.1(a) and proceeds allocated to Investor LLC pursuant to Section 3.2(a)
equal (b) the Avista Investments made through the end of the calendar month
immediately preceding the date of determination.
 
“Avista Controlled Entity”  means (a) any general partner or managing member of
ACP II or ACP II Offshore or any Affiliate of such general partner or managing
member (excluding portfolio companies), provided that such Person is controlled
by the same Persons (the “Avista Controlling Parties”) that, as of the date
hereof, control Avista GP, or (b) any Person organized, formed or incorporated
and managed or controlled by the Avista Controlling Persons (excluding portfolio
companies) as a vehicle for purposes of making investments.
 
“Avista GP” means Avista Capital Partners II GP, LLC, a Delaware limited
liability company.
 
“Avista Investments” means the sum of the Investor Asset Basis and the
expenditures under the Operating Agreement funded by Investor LLC pursuant to
Section 2.2(a)(i).
 
“Avista Offshore” means Avista Capital Partners (Offshore) II LP, a Delaware
limited partnership.
 

 
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“Avista Parties” means Avista and Investor LLC.
 
“Business Day” means any day other than a Saturday, a Sunday or a day on which
banks are closed for business in Houston, Texas.
 
“Carrizo” means Carrizo (Marcellus) LLC, a Delaware limited liability company.
 
“Carrizo Adjusted Investment Amount” means the Carrizo Investments less the
Increased Land Value.
 
“Carrizo Allocation Threshold” means the first time that (a) the aggregate
amounts of Net Cash Flow From Production allocated to Carrizo pursuant to
Section 3.1(b) and proceeds allocated to Carrizo pursuant to Section 3.2(b)
equal (b) the Increased Land Value.
 
“Carrizo Asset Basis” means the sum of the Initial Carrizo Assets Market Value
and the aggregate acquisition cost for the Carrizo Parties’ interest in any Oil
and Gas Interests dedicated under Section 2.1(a)(ii), which, for the avoidance
of doubt, does not include acquisition costs for Oil and Gas Interests acquired
pursuant to the Land Bank Agreement without Carrizo Party funds.
 
“Carrizo Cap” means One Hundred Fifty Million Dollars ($150,000,000), including
the Carrizo Asset Basis, but excluding any payments by Carrizo to Investor LLC
under Section 5.2(b) and expenditures by Carrizo in connection with Exclusive
Operations conducted by it in which Investor LLC does not participate.
 
“Carrizo Equalization Share” means 100% minus the Investor Equalization Share.
 
“Carrizo Holding” means Carrizo Marcellus Holding Inc., a Delaware corporation.
 
“Carrizo Investments” means the sum of the Carrizo Asset Basis and any
expenditures under the Operating Agreement funded by Carrizo pursuant to
Sections 2.2(b) or 2.2(c).
 
“Carrizo Parties” means COGI and Carrizo.
 
“Cash Call” has the meaning set forth in Exhibit D of the Operating Agreement.
 
“Catch-Up Period” means the period beginning on the Effective Date and ending on
the first date that the Avista Investments equal the Carrizo Asset Basis.
 
“Change of Control” means, with respect to any Person, a transaction or event
(including a Transfer of securities), or series of related transactions or
events, that causes such Person to cease to be controlled by the same Person or
Persons who controlled such Person prior to the occurrence of such transaction
or event; provided, that a transaction or event affecting the control of any
wholly owned Subsidiary of COGI or any Avista Controlled Entity that is
undertaken for internal restructuring or reorganization purposes will not
constitute a Change of
 

 
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Control of such Person, provided, further that such Person remains a wholly
owned Subsidiary of COGI or an Avista Controlled Entity, as the case may be,
following such transaction or event.
 
“COGI” means Carrizo Oil & Gas, Inc., a Texas corporation.
 
“Designated Area” has the meaning set forth in the recitals to this Agreement.
 
“Drilling Unit” has the meaning set forth in the Operating Agreement.
 
“Entitlement” means that quantity of Hydrocarbons (excluding all quantities used
or lost in Joint Operations) of which a Party has the right and obligation to
take delivery pursuant to the terms of the Operating Agreement, as such rights
and obligations may be adjusted by the terms of any lifting, balancing or other
disposition agreements entered into pursuant to Article 9 of the Operating
Agreement.
 
“Equity Offeror” has the meaning set forth in Section 4.3(b)(i).
 
“Equity Purchase Rights” has the meaning set forth in Section 4.2(b).
 
“Equity ROFR Initiator” has the meaning set forth in Section 4.2(b).
 
“Equity Tag-Along Initiator” has the meaning set forth in Section 4.3(b)(i).
 
“Equity Tag-Along Interest” means, with respect to Carrizo or Investor LLC, as
applicable, such Party’s interest in the Properties (expressed as a percentage
of all of such Party’s interest in the Properties) that is equal to the product
of (x) such Party’s Participation Interest in all of the Properties and (y) the
Indirect Beneficial Ownership Interest in the other Party that is subject to the
Proposed Equity Tag-Along Sale.
 
“Equity Tag-Along Notice” has the meaning set forth in Section 4.3(b)(ii).
 
“Equity Tag-Along Rights” has the meaning set forth in Section 4.3(b)(i).
 
“Exclusive Operations” has the meaning set forth in the Operating Agreement and
includes any Subsequent Exclusive Operation described in Section 5.2(b).
 
“Governmental Authority” or “Governmental Authorities” means any nation or state
and any political subdivision thereof and any governmental, regulatory or
administrative agency, commission, body or other authority exercising or
entitled to exercise any administrative, executive, judicial, legislative,
police, regulatory or taxing authority or power; and any court or governmental
tribunal.
 
“Hydrocarbons” means oil, condensate, gas, casinghead gas and other liquid or
gaseous hydrocarbons.
 
“Increased Land Value” means $33,503,238.89, which represents the difference
between the Initial Carrizo Assets Market Value and the aggregate acquisition
cost (as reflected on COGI’s books) of the Initial Carrizo Assets.
 
 
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“Indirect Beneficial Ownership Interest” means Carrizo’s or Investor LLC’s, as
applicable, interest in the Properties (expressed as a percentage of all of such
Party’s interest in the Properties) represented by limited liability company
interests in such Party, which the Parties acknowledge and agree shall be in the
same proportion that a Person’s aggregate ownership of limited liability company
interests bears to all of the issued and outstanding limited liability company
interests in such Party; provided that the Profit Interest shall be disregarded
for purposes of such calculation.
 
“Initial Carrizo Assets” has the meaning set forth in Section 2.1(a)(i).
 
“Initial Carrizo Assets Market Value” means the agreed value for Initial Carrizo
Assets as set forth on Exhibit 2.1(a) and totaling $98,977,561.73.
 
“Initial Members” has the meaning set forth in the Investor LLC Agreement.
 
“Investor Asset Basis” means the aggregate amount funded by Investor LLC
pursuant to the Land Bank Agreement for the purchase of the Investor Assets.
 
“Investor Assets” has the meaning set forth in Section 2.1(b).
 
“Investor Equalization Share” means the quantity obtained (expressed as a
percentage) by dividing (a) the Avista Investments by (b) the sum of the Avista
Investments and the Carrizo Adjusted Investment Amount, in each case as of the
last day of the month immediately preceding the date of calculation.
 
“Investor LLC” means ACP II Marcellus LLC, a Delaware limited liability company.
 
“Investor LLC Agreement” means the limited liability company agreement of
Investor LLC, dated the Execution Date, but effective as of the Effective Date.
 
“Investor LLC Cap” means One Hundred Fifty Million Dollars ($150,000,000),
including the Investor Asset Basis, but excluding any payments by Investor LLC
to Carrizo under Section 5.2(b) and expenditures by Investor LLC in connection
with Exclusive Operations conducted by it in which Carrizo does not participate.
 
“JOA Trigger Date” has the meaning set forth in Section 5.2(a).
 
“Joint Account” has the meaning set forth in the Operating Agreement.
 
“Joint Operations” has the meaning set forth in the Operating Agreement.
 
“Joint Properties” has the meaning set forth in the Operating Agreement.
 
“Knowledge” means, with respect to a Party, the actual knowledge of any officer
of such Party or other Person with primary responsibility for the particular
subject matter.
 
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“Land Bank Agreement” means the Agreement, dated as of August 1, 2008, by and
between COGI and Investor LLC.
 
“Laws” means all laws, statutes, rules, regulations, ordinances, orders,
decrees, requirements, judgments and codes of Governmental Authorities.
 
“Management Services Agreement” means the Management Services Agreement dated
the Execution Date, by and between COGI and Investor LLC.
 
“Membership Interest” means the interest in Investor LLC designated as such in
the Investor LLC Agreement, having the rights and preferences set forth therein.
 
“Minimum Commitment Date” means the date on which the aggregate contributions of
the Carrizo Parties, on the one hand, and the Avista Parties, on the other hand,
pursuant to Section 2.1 and 2.2 have satisfied the Carrizo Cap and the Investor
LLC Cap.
 
“Net Cash Flow From Production” means the positive amount, if any, shown on the
Cash Call for a given calendar month (e.g., March) that is calculated as (a) the
proceeds from the sale of the Parties’ Entitlements to Hydrocarbons from
Operations conducted on the Properties actually received by the Operator in
respect of joint marketing conducted pursuant to Section 2.4 during the calendar
month immediately preceding the date of such Cash Call (e.g., February) plus the
positive adjustment, if any, by which estimated operating and capital
expenditures for Operations of the Parties reflected on the Cash Call for the
second calendar month immediately preceding the date of such Cash Call (e.g.,
January) exceeded actual or accrued operating and capital expenditures for
Operations of the Parties during such second preceding calendar month, less (b)
the total amount of estimated operating and capital expenditures for Operations
of the Parties during the calendar month immediately following the date of such
Cash Call (e.g., April) less the negative adjustment, if any, by which actual or
accrued operating and capital expenditures for Operations of the Parties
reflected on the Cash Call for the second calendar month immediately preceding
the date of such Cash Call (e.g., January) exceeded the estimated operating and
capital expenditures for Operations of the Parties reflected on the Cash Call
for such second preceding calendar month.  Notwithstanding the foregoing, both
the proceeds from the sale of Entitlements and the operating and capital
expenditures attributable to Properties that either (i) Carrizo has Transferred
to a wholly-owned Subsidiary of COGI or (ii) Investor LLC has Transferred to an
Avista Controlled Entity in accordance with Section 4.1(b), shall be included in
this definition of “Net Cash Flow From Production.”  However, neither the
proceeds from the sale of Entitlements, nor the operating and capital
expenditures attributable to Exclusive Operations where either Carrizo or
Investor LLC is a Non-Consenting Party pursuant to (i) Article 7.4(B)(1) of the
Operating Agreement or Section 5.2(b) or (ii) Article 7.4(B)(2), (3) or (4) of
the Operating Agreement until the termination of the Non-Consenting Party’s
relinquishment of its rights in the affected Property, shall be included in this
definition of “Net Cash Flow From Production.”

“Non-Consenting Party” means either Carrizo or Investor LLC, if such Party
elects not to participate in an Exclusive Operation as described in the
Operating Agreement.  For the avoidance of doubt, as used herein, the term
“Non-Consenting Party” shall not include any other party that may be subject to
the Operating Agreement.
 
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“Offered Equity Interest” has the meaning set forth in Section 4.3(b)(ii).
 
“Offered Property Interest” has the meaning set forth in Section 4.3(a)(ii).
 
“Oil and Gas Interests” means (a) interests in and rights with respect to oil,
gas, mineral, and related properties and assets of any kind and nature, direct
or indirect, including working, leasehold and mineral interests and operating
rights and royalties, overriding royalties, production payments, net profit
interests and other nonworking interests and nonoperating interests; (b) all
interests in rights with respect to Hydrocarbons and other minerals or revenues
therefrom, all contracts in connection therewith and claims and rights thereto
(including all oil and gas leases, operating agreements, unitization and pooling
agreements and orders, division orders, transfer orders, mineral deeds, royalty
deeds, oil and gas sales, exchange and processing contracts and agreements, and
in each case, interests thereunder), surface interests, fee interests,
reversionary interests, reservations, and concessions; (c) all easements, rights
of way, licenses, permits, leases, and other interests associated with,
appurtenant to, or necessary for the operation of any of the foregoing; and
(d) all interests in equipment and machinery (including wells, well equipment
and machinery), oil and gas production, gathering, transmission, treating,
processing, and storage facilities (including tanks, tank batteries, pipelines,
and gathering systems), pumps, water plants, electric plants, gasoline and gas
processing plants, refineries, and other tangible personal property and fixtures
associated with, appurtenant to, or necessary for the operation of any of the
foregoing.
 
“Operator” has the meaning set forth in the Operating Agreement.
 
“Operating Agreement” means the Operating Agreement, dated the Execution Date,
but effective as of the Effective Date, by and between Carrizo and Investor LLC.
 
“Operating Committee” has the meaning set forth in the Operating Agreement.
 
“Operation” means any Joint Operation or Exclusive Operation in which both
Investor LLC and Carrizo participate.
 
“Participation Interest” means as to any Party, the undivided interest of such
Party (expressed as a percentage of the total interests of all the Parties) in
the rights and obligations derived from the Parties’ respective interests in
each of the Properties and each Operation thereon.
 
“Party” means Carrizo, COGI, Avista, Investor LLC, or any of their respective
permitted successors and assigns.
 
“Permitted Pledge” means the pledge, hypothecation or other voluntary
encumbrance of a Party’s direct or indirect interest (including the securities
of any of its Affiliates) in the Properties; provided that (a) each pledge,
hypothecation or encumbrance of a Party’s direct interest in the Properties
complies with the Operating Agreement, and (b) with respect to each pledge,
hypothecation or other voluntary encumbrance of the limited liability company
interests of Carrizo or Investor LLC, any Transfer of such limited liability
company interests in connection with a secured party’s exercise of remedies
under such pledge,
 
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hypothecation or encumbrance is subject to the other Party’s rights under
Sections 4.2(b) and 4.3(b) of this Agreement.
 
“Permitted Pledge Transfer” means, subject to Section 4.1(c), any Transfer made
in connection with a secured party’s exercise of remedies under a Permitted
Pledge or any Transfer made after commencement of a bankruptcy or insolvency
proceeding respecting the Party bound by the Permitted  Pledge and approved by
the court or tribunal having jurisdiction over such proceeding.
 
“Person” means any individual, firm, corporation, partnership, limited liability
company, joint venture, association, trust, unincorporated organization,
Governmental Authority, or any other entity.
 
“Profit Interest” means the interest in Investor LLC designated as such in the
Investor LLC Agreement, having the rights and preferences set forth therein.
 
“Properties” means all Oil and Gas Interests dedicated pursuant to
Sections 2.1(a) and 2.1(b); provided that any Oil and Gas Interests in
Properties  relinquished by Carrizo or Investor LLC pursuant to Exclusive
Operations under Article 7 of the Operating Agreement or as set forth in Section
5.2(b)shall not be deemed “Properties” hereunder from and after such event,
except to the extent otherwise expressly provided herein.
 
“Property Offeror” has the meaning set forth in Section 4.3(a)(ii).
 
“Property Tag-Along Initiator” has the meaning set forth in Section 4.3(a)(i).
 
“Property Tag-Along Interest” has the meaning set forth in Section 4.3(a)(iii).
 
“Property Tag-Along Notice” has the meaning set forth in Section 4.3(a)(ii).
 
“Property Tag-Along Rights” has the meaning set forth in Section 4.3(a)(i).
 
“Property Transfer Effective Date” has the meaning set forth in Section 2.3(c).
 
“Proposed Forecast” has the meaning set forth in Section 5.2(c).
 
“Proposed Equity Tag-Along Sale” means (a) the Transfer of limited liability
company interests (expressed as a percentage), other than the Profit Interest,
in either Carrizo or Investor LLC, as applicable, to, in the case of Carrizo,
any Person other than a wholly owned Subsidiary of COGI, or in the case of
Investor LLC, any Person other than an Avista Controlled Entity, in one
transaction or a series of related transactions, that constitutes a Transfer of
an Indirect Beneficial Ownership Interest in Carrizo’s or Investor LLC’s, as
applicable, interests in the Properties that is equal to or greater than the
Tag-Along Threshold or (b) a Change of Control, direct or indirect, of Carrizo
or Investor LLC, except that any such Change of Control that occurs as a result
of a Change of Control of COGI will not constitute a Proposed Equity Tag-Along
Sale, and Investor LLC will have no right to participate in any such Change of
Control pursuant to Section 4.3(b) or otherwise.
 
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“Proposed Property Tag-Along Sale” has the meaning set forth in
Section 4.3(a)(i).
 
“Proposing Party” has the meaning set forth in Section 5.2(b).
 
“Prospect” has the meaning set forth in the Operating Agreement.
 
“Qualifying Equity Interests” has the meaning set forth in Section 4.2(b).
 
“Qualifying Equity Transfer” has the meaning set forth in Section 4.2(b).
 
“Selling Member” has the meaning set forth in Section 4.2(b).
 
“Subsequent Exclusive Operation” has the meaning set forth in the Operating
Agreement.
 
“Subsidiary” of a Person means a corporation, partnership, joint venture,
limited liability company or other business entity of which a majority of the
shares of securities or other interests having ordinary voting power for the
election of directors or other governing body (other than securities or
interests having such power only by reason of the happening of a contingency)
are at the time beneficially owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries, or both,
by such Person.
 
“Tag-Along Threshold” means, with respect to Carrizo or Investor LLC, (a) 10% of
such Party’s interest in the proved reserves (based on the most recent
independent reserve report) in the Properties, (b) 10% of the aggregate
acquisition cost of such Party’s net mineral leasehold interests in the
Properties or (c) 10% of such Party’s book value in the Joint Properties.
 
“Taxes” means all income, profits, franchise, sales, use, ad valorem, property,
severance, production, excise, stamp, documentary, real property transfer or
gain, gross receipts, goods and services, registration, capital, transfer, or
withholding taxes or other governmental fees or charges imposed by any
Governmental Authority, including any interest, penalties, or additional amounts
that may be imposed with respect thereto.
 
“Transaction Documents” means this Agreement, the Operating Agreement, the
Investor LLC Agreement and the Management Services Agreement.
 
“Transfer” means any sale, assignment, conveyance, transfer or other
disposition, voluntary or involuntary, by operation of law (including without
limitation by merger or other business combination transaction) or otherwise;
provided that unless otherwise specified herein, a Party’s entry into a
Permitted Pledge shall not constitute a Transfer.  When used as a verb, the term
“Transfer” shall have a correlative meaning.

“Transfer Taxes” means any Transfer, documentary, sales, use, registration,
value-added, and other similar Taxes, including interest, fines, penalties or
additional amounts which may be imposed with respect thereto, incurred in
connection with the execution, delivery or performance of this Agreement or the
transactions contemplated hereby.
 
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“Voting Securities” means any securities which at present or upon conversion
entitle the owner or holder thereof to vote for the election of directors of the
entity who issued such securities or, with respect to unincorporated entities,
Persons exercising similar functions.
 
“Work Program and Budget” has the meaning set forth in the Operating Agreement.
 
ARTICLE 2
 
DEDICATIONS; EXPENSE ALLOCATION;
INTEREST TRANSFERS; JOINT MARKETING
 
2.1 Dedication of Oil and Gas Interests.
 
(a) The Carrizo Parties hereby dedicate, for the joint benefit of Carrizo and
Investor LLC, (i) 100% of their interests in and to the properties described on
Exhibit 2.1(a), and all of their Oil and Gas Interests associated with such
properties (the “Initial Carrizo Assets”), (ii) 100% of their interests in any
Oil and Gas Interests within the AMI acquired on or prior to the Effective Date
that are not the Initial Carrizo Assets, and (iii) 100% of their interests in
the Oil and Gas Interests that the parties to the Operating Agreement agree to
acquire pursuant to the Operating Agreement.  
 
(b) Investor LLC hereby dedicates, for the joint benefit of Investor LLC and
Carrizo, (i) 100% of its interests in and to the properties described on
Exhibit 2.1(b), as well as all of its Oil and Gas Interests associated with such
properties, (ii) 100% of its interest in the Oil and Gas Interests acquired in
the Designated Area pursuant to the Land Bank Agreement following the Effective
Date and (iii) 100% of its interest in the Oil and Gas Interests that the
parties to the Operating Agreement agree to acquire pursuant to the Operating
Agreement (the “Investor Assets”).  Prior to dedicating any Oil and Gas
Interests pursuant to Section 2.1(b)(i)-(ii), Investor LLC will not create or
allow to exist any overriding royalty interest, burdens or other obligations
with respect to such Oil and Gas Interests other than those existing at the time
such Oil and Gas Interests were acquired.
 
(c) The Parties acknowledge that, following the Effective Date, activities and
operations with respect to certain Oil and Gas Interests dedicated pursuant to
Sections 2.1(a) and 2.1(b) may constitute Exclusive Operations whereby Carrizo
or Investor LLC elect not to participate in such activities or operations in
accordance with the Operating Agreement.  In such case, the Parties agree that
notwithstanding Sections 2.1(a) and 2.1(b), the Oil and Gas Interests associated
with Operations relinquished by Carrizo or Investor LLC pursuant to Exclusive
Operations (i) under Article 7.4(B)(1) of the Operating Agreement or as set
forth in Section 5.2(b) shall no longer constitute Properties hereunder and (ii)
under Article 7.4(B)(2), (3) or (4) of the Operating Agreement shall not
constitute Properties hereunder unless and until the Non-Consenting Party has
reinstated its rights pursuant to Article 7.4(C)(2) of the Operating Agreement.
 
2.2 Capital Commitments
 
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(a) Investor LLC shall fund (i) until the Property Transfer Effective Date, 100%
of all expenditures and amounts allocated to or required to be paid by either
Investor LLC or Carrizo under the Operating Agreement, and (ii) thereafter, all
expenditures and amounts allocated to or required to be paid by Investor LLC
under the Operating Agreement, up to the Investor LLC Cap.
 
(b) From and after the Property Transfer Effective Date, Carrizo shall fund all
expenditures and amounts allocated to or required to be paid by it under the
Operating Agreement, up to the Carrizo Cap.
 
(c) From and after the satisfaction of the funding obligations provided for in
Sections 2.2(a) and (b) above, Carrizo’s and Investor LLC’s funding obligations
shall be governed by the Operating Agreement.  At Carrizo’s election, the
funding of expenditures and other amounts provided for in Sections 2.2(a) and
(b) above may be accomplished by net cash calls in accordance with the Operating
Agreement.
 
(d) Carrizo may, in its sole discretion, elect from time to time to fund
expenditures or amounts allocated to it under the Operating Agreement prior to
the Property Transfer Effective Date in accordance with Article 1.6 of Exhibit D
to the Operating Agreement (even though such amounts are required to be funded
by Investor LLC pursuant to Section 2.2(a)(i)).  In the event that Carrizo so
elects, Investor LLC shall promptly reimburse Carrizo for any such amounts and,
upon Carrizo’s receipt of such reimbursements, such amounts will not be
aggregated in respect of the Carrizo Cap but shall instead be aggregated in
respect of the Investor LLC Cap.
 
(e) Notwithstanding anything to the contrary herein or in the Operating
Agreement, if either Party fails to make any capital commitments as required by
Section 2.2(a)(i) or Section 2.2(b), as applicable, and such failure is not
cured within ten (10) Business Days of notice provided by the non-defaulting
Party, at the option of the non-defaulting Party the provisions in Article 20.3
of the Operating Agreement (regarding the AMI) shall terminate and be of no
further effect as between Carrizo and Investor LLC.
 
2.3 Transfer of Properties Between the Parties.
 
(a) Until the termination of the Catch-Up Period, record title to the Oil and
Gas Interests dedicated pursuant to Sections 2.1(a) and 2.1(b) shall not be
Transferred between Carrizo and Investor LLC, and the Carrizo Parties or
Investor LLC, as the case may be, will hold record title to the Oil and Gas
Interests dedicated by such Party pursuant to Section 2.1 notwithstanding
Carrizo’s or Investor LLC’s beneficial ownership interest in such Oil and Gas
Interests as set forth below.
 
(b) The Carrizo Parties and Investor LLC agree and acknowledge that, during the
Catch-Up Period, Carrizo shall own and hold an undivided beneficial ownership
interest in the Properties, as it may be adjusted from time to time, in the same
proportion that the Carrizo Investments bear to the sum of the Avista
Investments and the Carrizo Investments, and Investor LLC shall own and hold an
undivided beneficial ownership interest in the Properties, as it may be adjusted
from time to time, in the same proportion
 
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that the Avista Investments bear to the sum of the Avista Investments and the
Carrizo Investments.  The Carrizo Parties and Investor LLC further agree and
acknowledge that, upon the making of any investment pursuant to the terms hereof
during the Catch-Up Period, undivided beneficial ownership interests in the
Properties necessary to adjust Carrizo’s and Investor LLC’s beneficial ownership
interests in accordance with the preceding sentence shall be simultaneously
assigned, transferred and conveyed from Carrizo to Investor LLC or from Investor
LLC to Carrizo, as the case may be, automatically and without further act or
deed of any such Party.
 
(c) Effective as of the date that the Catch-Up Period terminates (the “Property
Transfer Effective Date”), (i) Carrizo, or in the case Carrizo does not hold
record title, the Carrizo Parties, shall assign to Investor LLC, and Investor
LLC shall accept from Carrizo or the Carrizo Parties (as the case may be),
record title to an undivided 50% interest in the Carrizo Parties’ Oil and Gas
Interests dedicated pursuant to Section 2.1(a); and (ii) Investor LLC shall
assign to Carrizo, and Carrizo shall accept from Investor LLC, record title to
an undivided 50% interest in Investor LLC’s Oil and Gas Interests dedicated
pursuant to Section 2.1(b).  As soon as reasonably practicable following the
Property Transfer Effective Date, the Carrizo Parties and Investor LLC shall
execute and deliver, in recordable form reasonably acceptable to such Parties,
conveyances to effect the cross-assignments described in this paragraph.  To the
extent the Transfer of any Oil and Gas Interest is subject to a third Person
consent or preferential purchase right triggered by the Transfers contemplated
hereunder, and consent or waiver is not received, such Party holding record
title shall hold the Property for the benefit of such other Party, and the
intended Party shall pay all amounts due and be responsible for the performance
of all obligations as if record title and beneficial ownership had been held by
the intended Party, until such consent is obtained or preferential purchase
right waived.
 
2.4 Joint Marketing.  Notwithstanding anything to the contrary in Article 9 of
the Operating Agreement, until the provisions of Section 3.1(a) and 3.1(b) are
no longer applicable, Carrizo, in its capacity as Operator under the Operating
Agreement, shall use commercially reasonable efforts, and Investor LLC hereby
irrevocably designates Carrizo as agent for such purpose, to market on behalf of
Investor LLC all of Investor LLC’s Entitlement to Hydrocarbons from the
Properties, together with Carrizo’s Entitlement to Hydrocarbons from the
Properties, as a single stream.  Investor LLC shall not market and shall cause
its Affiliates not to market any of its Entitlement without the prior written
consent of Carrizo.  Investor LLC acknowledges and agrees that Carrizo does not
warrant or guarantee any market or price that it will be able to procure for the
Parties’ collective Entitlement.
 
ARTICLE 3
ALLOCATIONS OF NET CASH FLOW FROM PRODUCTION
AND PROPERTY SALE PROCEEDS
 
3.1 Allocation of Net Cash Flow From Production.  Within twenty (20) days
following the end of each calendar month, Net Cash Flow From Production shall be
allocated between Investor LLC and Carrizo as follows:
 
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(a) the Investor Equalization Share thereof to Investor LLC, and the Carrizo
Equalization Share thereof to Carrizo, until the Avista Allocation Threshold is
reached;
 
(b) thereafter, 100% to Carrizo, until the Carrizo Allocation Threshold is
reached; and
 
(c) thereafter, with respect to each Operation from which such Net Cash Flow
From Production arises, in accordance with their respective Participation
Interests in that Operation.
 
3.2 Allocation of Proceeds from Property Dispositions.  Except as provided in
Section 3.3, proceeds received in the preceding calendar month from the Transfer
of any Oil and Gas Interest in the Properties shall be allocated at the same
time as allocations are being made pursuant to Section 3.1, except that proceeds
from a single Property Transfer in excess of One Million Dollars ($1,000,000)
shall be allocated promptly after receipt thereof, in either case, between
Investor LLC and Carrizo as follows:
 
(a) the Investor Equalization Share thereof to Investor LLC and the Carrizo
Equalization Share thereof to Carrizo, until the Avista Allocation Threshold is
reached;
 
(b) thereafter, 100% to Carrizo, until the Carrizo Allocation Threshold is
reached; and
 
(c) thereafter, in accordance with the Parties’ respective Participation
Interests in the Oil and Gas Interests disposed of.
 
3.3 Special Allocation of Proceeds from Certain Property Dispositions.  Proceeds
from any Transfer of Oil and Gas Interests in the Properties (i) by Carrizo to a
wholly owned Subsidiary of COGI, (ii) by Avista to an Avista Controlled Entity
in accordance with Section 4.1(b), (iii) attributable to Operations relinquished
by Carrizo or Investor LLC pursuant to Exclusive Operations under Article
7.4(B)(1) of the Operating Agreement or as set forth in Section 5.2(b) or (iv)
effected pursuant to Sections 4.2(a), 4.3(a)(v) or 4.3(b), shall not be subject
to Section 3.2 and shall be allocated 100% to the Transferring Party.  Proceeds
from any Transfer of Oil and Gas Interests in Properties pursuant to which
Exclusive Operations were conducted by a Party in which the other Party did not
participate pursuant to Article 7.4(B)(2), (3) or (4) of the Operating Agreement
shall be allocated 100% to the Party participating in such Exclusive Operations
to the extent required to terminate the relinquishment of the Non-Consenting
Party’s rights in the affected Property or Properties pursuant to
Article 7.4(C)(2) of the Operating Agreement and shall not be subject to Section
3.2; provided, if such allocation results in termination of such relinquishment,
any remaining proceeds shall be allocated to the Parties as otherwise
contemplated by Section 3.2,
 
3.4 Coordination With Operating Agreement.  Nothing in this Article 3 shall
change or affect any Party’s obligation to pay its proportionate share of all
costs and liabilities incurred in Operations on or in connection with the
Properties, as its share thereof is set forth in the Operating Agreement,
remaining subject, however, to modifications under Section 2.2.
 
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ARTICLE 4
TRANSFER OF OIL AND GAS INTERESTS IN PROPERTIES
 
4.1 Prohibition on Certain Transfers.
 
(a) During the Catch-Up Period, Carrizo may not Transfer any of its interest in
the Properties dedicated pursuant to Section 2.1 to any Person without the prior
written consent of Investor LLC, except to any wholly owned Subsidiary of COGI
or any Permitted Pledge Transfer.  Following the Catch-Up Period, Transfers by
Carrizo shall be subject to Sections 4.2(a) and 4.3(a), except for Transfers to
any wholly owned Subsidiary of COGI or in the case of a Permitted Pledge
Transfer.  Transfers of limited liability company interests in Carrizo and other
transactions that constitute a Proposed Equity Tag-Along Sale shall be subject
to Section 4.2(b) or Section 4.3(b), as applicable.
 
(b) During the Catch-Up Period, Investor LLC may not Transfer any of its
interest in the Properties dedicated pursuant to Section 2.1 to any Person
without the prior written consent of the Carrizo Parties, except in the case of
a Permitted Pledge Transfer.  Without the prior written consent of the Carrizo
Parties (which may not be unreasonably withheld), Investor LLC may not Transfer
any of its interest in the Properties to any Avista Controlled
Entity.  Following the Catch-Up Period, Transfers by Investor LLC shall be
subject to Sections 4.2(a) and 4.3(a), except for Transfers to any Avista
Controlled Entity with the prior written consent of the Carrizo Parties (which
may not be unreasonably withheld) or any Permitted Pledge Transfer.  Transfers
of limited liability company interests in Investor LLC and other transactions
that constitute a Proposed Equity Tag-Along Sale shall be subject to Section
4.2(b) or Section 4.3(b), as applicable.
 
(c) Prior to the Property Transfer Effective Date, any encumbrance or security
interest created by the Carrizo Parties or Investor LLC in the Properties
(including any Permitted Pledge) shall provide that the lienholder’s rights are
expressly subordinated to the beneficial interest of the Carrizo Parties or
Investor LLC, as the case may be, in the Properties as set forth in Section
2.3(b).  Promptly following receipt, the Carrizo Parties shall provide Investor
LLC a copy of any notification of default under any agreement governing any
material funded debt of Carrizo or any of its Affiliates that are “Restricted
Subsidiaries” (as such term may be defined in COGI's senior secured revolving
credit facility or other similar commercial financing agreement), the result of
which default is to cause, or permit the holder or holders thereof to cause,
such debt to be accelerated.  Following Carrizo’s default under the terms of any
Permitted Pledge of Carrizo’s interest in the Properties but prior to the
secured party’s exercise of remedies with respect to such interest, Carrizo
agrees to designate Investor LLC (or its designee) as “co-operator” under the
Operating Agreement for any Operations with respect to such Properties.
 
(d) Notwithstanding any provision of this Agreement to the contrary, any
Transfer of a Party’s interest in the Properties (including, for purposes of
this Section 4.1(d) only, a Party’s entry into a Permitted Pledge) is subject to
the restrictions on Transfer in the event of such Party’s default set forth in
Article 8.2(A)(5) of the Operating Agreement.
 
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4.2 Transfers Below the Tag-Along Threshold.
 
(a) Following termination of the Catch-Up Period, Carrizo and Investor LLC may
Transfer their respective interests in the Properties (in a single transaction
or series of related transactions) constituting less than the Tag-Along
Threshold, subject to applicable preferential purchase rights and other Transfer
restrictions set forth in the Operating Agreement; provided that the Parties
hereby agree that any exclusion in the Operating Agreement from such
preferential purchase rights and other Transfer restrictions with respect to
Affiliate transactions shall not apply to Transfers by Carrizo to any Affiliate
other than a wholly owned Subsidiary of COGI or by Investor LLC to any of its
Affiliates.
 
(b) In connection with any Transfer of limited liability company interests in
Carrizo or Investor LLC (in such capacity, the “Equity ROFR Initiator”) that
does not constitute a Proposed Equity Tag-Along Sale (except Transfers to, in
the case of Carrizo, any wholly owned Subsidiary of COGI, or in the case of
Investor LLC, any Avista Controlled Entity), in one transaction or a series of
related transactions (a “Qualifying Equity Transfer”), the other Party shall be
entitled to exercise a right of first refusal (the “Equity Purchase Rights”) to
purchase the limited liability company interests that are subject to the
Qualifying Equity Transfer (the “Qualifying Equity Interests”) in accordance
with this Section 4.2(b).  Once the final terms and conditions of a Qualifying
Equity Transfer have been fully negotiated, the Person that proposes to Transfer
(the “Selling Member”) the Qualifying Equity Interests shall disclose all the
final terms and conditions as are relevant to the Equity ROFR Initiator, and the
Equity ROFR Initiator shall forward such notice to the Party that has the Equity
Purchase Rights hereunder (Carrizo or Investor LLC, as applicable), which notice
shall be accompanied by a copy of all instruments or relevant portions of
instruments establishing such terms and conditions.  The Party having the Equity
Purchase Rights shall have the right to acquire the Qualifying Equity Interests
from the Selling Member on the same final terms and conditions as such Selling
Member negotiated with the proposed transferee if, within thirty (30) days of
the Selling Member’s notice, such Party delivers to the Equity ROFR Initiator a
counter-notification that it accepts such terms and conditions without
reservations or conditions.  If Carrizo or Investor LLC, as applicable, does not
deliver such counter-notification, the Selling Member may complete the Transfer
of the Qualifying Equity Interests to the proposed transferee under terms and
conditions no more favorable to the Selling Member than those set forth in the
notice to the Parties, provided that such Transfer is concluded within one
hundred eighty (180) days from the date of the notice.

4.3 Other Transfers.  Preferential purchase rights and other Transfer
restrictions set forth in the Operating Agreement and otherwise applicable shall
not apply to any Transfer (including indirect Transfers described under
Section 4.3(b)) of a Party’s direct or indirect interests in the Properties to
any Person (in a single transaction or series of related transactions), if such
Oil and Gas Interests equal or exceed the Tag-Along Threshold; provided that any
such Transfer not otherwise excepted in this Article IV shall be subject to the
restrictions set forth in this Section 4.3:
 
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(a) Tag-Along Rights in Sales of the Properties.
 
(i) If Carrizo or Investor LLC (such Party, the “Property Tag-Along Initiator”)
desires to Transfer all or a part of its interests in the Properties to, in the
case of Carrizo, a Person that is not a wholly owned Subsidiary of COGI, or in
the case of Investor LLC, any Person, in a single transaction or series of
related transactions, equal to or greater than the Tag-Along Threshold (a
“Proposed Property Tag-Along Sale”),  then the other Party shall be entitled to
exercise tag-along rights to participate in such Proposed Property Tag-Along
Sale (in accordance with this Section 4.3(a)) at the same price and on the same
terms and conditions as those offered to the Property Tag-Along Initiator
(“Property Tag-Along Rights”).
 
(ii) No later than ten (10) Business Days following the Property Tag-Along
Initiator’s receipt of an offer constituting a Proposed Property Tag-Along Sale,
the Property Tag-Along Initiator shall deliver a written notice (a “Property
Tag-Along Notice”) to the other Party stating that it desires to effect a
Proposed Property Tag-Along Sale, which notice shall set forth (A) the identity
of the Person (the “Property Offeror”) that desires to acquire the Property
Tag-Along Initiator’s interest in the Properties, (B) a summary in reasonable
detail of the representations, warranties, covenants, conditions and
indemnification proposed by the Offeror, (C) the Property Tag-Along Initiator’s
interest in the Properties (the “Offered Property Interest”) that the Property
Offeror proposes to acquire (expressed as a percentage of all of the Property
Tag-Along Initiator’s interest of such type in the Properties), (D) the proposed
total purchase price for the Offered Property Interest and (E) any other
material terms governing the offer.
 
(iii) Within twenty (20) Business Days of its receipt of a Property Tag-Along
Notice, Carrizo or Investor LLC, as applicable, shall have the right, but not
the obligation, to elect, by written notice to the Property Tag-Along Initiator,
to include a portion of its interest in the Properties constituting the same
type of interest as the Offered Interest in the Proposed Property Tag-Along Sale
(expressed as a percentage of all of such Party’s interest of such type in the
Properties) that is equal to the product of (x) its Participation Interest in
the Properties and (y) the Offered Property Interest (the “Property Tag-Along
Interest”).  Such Party’s failure to give unconditional written notice of such
election within such period shall be deemed an election by such Party not to
exercise its Property Tag-Along Rights.

(iv) If Carrizo or Investor LLC, as applicable, exercises its Property Tag-Along
Rights, then both Parties shall participate in the Proposed Property Tag-Along
Sale, and the Offered Property Interest shall be reduced to the extent of the
Property Tag-Along Interest.
 
(v) If Carrizo or Investor LLC, as applicable, does not elect to exercise its
Property Tag-Along Rights, then the Property Tag-Along Initiator may, for a
period of sixty (60) days from the date of the Property Tag-Along Notice,
 
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consummate the Proposed Property Tag-Along Sale upon terms and conditions that
are no more favorable to the Property Tag-Along Initiator than those set forth
in the Property Tag-Along Notice.  Immediately after the closing of the Proposed
Property Tag-Along Sale, the Property Tag-Along Initiator shall provide the
other Party true and complete copies of all agreements relating to such
Transfer.
 
(vi) In the event that the Property Offeror fails to purchase the Property
Tag-Along Interest for which Property Tag-Along Rights have been properly
exercised from Carrizo or Investor LLC, as applicable, in accordance with
Section 4.3(a)(iv) and the Property Tag-Along Initiator consummates the Proposed
Property Tag-Along Sale in violation of this Section 4.3(a), then the Property
Tag-Along Initiator shall be required to purchase the other Party’s Property
Tag-Along Interest in the Properties in accordance with the provisions of
Section 4.3(a)(iv).
 
(b) Sales of Membership Interests in Carrizo or Investor LLC.  In addition to
the Property Tag-Along Rights of Carrizo and Investor LLC described in
Section 4.3(a), the limited liability company agreements of Carrizo and Investor
LLC shall prohibit Transfers of limited liability company interests in such
Party and other transactions that constitute a Proposed Equity Tag-Along Sale,
except in accordance with Section 4.2(b) and this Section 4.3(b).
 
(i) In connection with any Proposed Equity Tag-Along Sale with respect to
Carrizo or Investor LLC (in such capacity, the “Equity Tag-Along Initiator”),
the other Party shall be entitled to exercise tag-along rights to sell to the
proposing acquiror (the “Equity Offeror”) the Equity Tag-Along Interest of its
interest in the Properties (the “Equity Tag-Along Rights”) as determined by
Section 4.3(b)(iii).
 
(ii) No later than ten (10) Business Days following the Equity Tag-Along
Initiator’s receipt of a notice from one of its members of (x) such member’s
intent to Transfer an amount of limited liability company interests in the
Equity Tag-Along Initiator constituting a Proposed Equity Tag-Along Sale or (y)
any other transaction that may, if consummated, constitute a Proposed Equity
Tag-Along Sale, the Equity Tag-Along Initiator shall deliver a written notice
(an “Equity Tag-Along Notice”) to Carrizo or Investor LLC, as applicable,
stating that a member of the Equity Tag-Along Initiator or one of its Affiliates
desires to effect a Proposed Equity Tag-Along Sale, which notice shall set forth
(A) the identity of the Equity Offeror, (B) a summary in reasonable detail of
the representations, warranties, covenants, conditions and indemnification
proposed by the Equity Offeror, (C) the amount of such member’s limited
liability company interests in the Equity Tag-Along Initiator (the “Offered
Equity Interest”) that the Equity Offeror is willing to acquire, directly or
indirectly (expressed as a percentage of all outstanding limited liability
company interests in the Equity Tag-Along Initiator), (D) the proposed total
purchase price for the Offered Equity Interest and (E) any other material terms
governing the offer.
 
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(iii) Within twenty (20) Business Days of its receipt of an Equity Tag-Along
Notice, Carrizo or Investor LLC, as applicable, shall have the right, but not
the obligation, to elect, by written notice to the Equity Tag-Along Initiator,
to require that the Equity Offeror acquire such Party’s Equity Tag-Along
Interest in the Properties concurrently with its consummation of the Proposed
Equity Tag-Along Sale; provided that in the case of a direct or indirect Change
of Control of the Equity Tag-Along Initiator constituting a Proposed Equity
Tag-Along Sale under clause (b) of the definition of Proposed Equity Tag-Along
Sale, such Party’s Equity Tag-Along Interest shall equal all of its right, title
and interest in the Properties.  Such Party’s failure to give unconditional
written notice of such election within such period shall be deemed an election
by such Party not to exercise its Equity Tag-Along Rights.
 
(iv) If Carrizo or Investor LLC, as applicable, exercises its Equity Tag-Along
Rights, then the Equity Offeror shall be required, as a condition to its
acquisition of the Offered Equity Interest, to purchase such Party’s Equity
Tag-Along Interest in the Properties for the market value (expressed in U.S.
dollars) of such interest, based upon the amount in cash a willing buyer would
pay a willing seller in an arm’s length transaction.
 
(v) If Carrizo or Investor LLC, as applicable, does not elect to exercise its
Equity Tag-Along Rights, then the Equity Offeror may, for a period of sixty (60)
days from the date of the Equity Tag-Along Notice, consummate the Proposed
Equity Tag-Along Sale upon terms and conditions that are no more favorable to
the member of the Equity Tag-Along Initiator selling the Offered Equity Interest
than those set forth in the Equity Tag-Along Notice.  Immediately after the
closing of the Proposed Equity Tag-Along Sale, the Equity Tag-Along Initiator
shall provide Carrizo or Investor LLC, as applicable, true and complete copies
of all agreements relating to such Transfer.
 
(vi) In the event that the Equity Offeror fails to purchase the Equity Tag-Along
Interest in the Properties from Carrizo or Investor LLC, as applicable, in
accordance with Section 4.3(b)(iv) and the Equity Offeror consummates the
Proposed Equity Tag-Along Sale in violation of this Section 4.3(b), then the
Equity Tag-Along Initiator shall be required to purchase the other Party’s
Equity Tag-Along Interest in the Properties in accordance with the provisions of
Section 4.3(b)(iv).
 
(c) Certain Transfers of Membership Interests and Investor LLC’s Interest in the
Properties.  The Parties agree that (a) at the time of the Transfer of all
Membership Interests in Investor LLC to an unAffiliated third Person, or (b) the
sale of all or substantially all of the assets of Investor LLC to an
unAffiliated third Person, Investor LLC may, by written notice delivered no
later than simultaneously with the notice required under Section 4.3(a)(ii) or
4.3(b)(ii), as applicable, require, as a condition to any such Transfer and in
accordance with Article 4.9(B) of the Operating Agreement, that the Parties
jointly operate the Properties by either (x) entering into a mutually acceptable
new joint operating agreement or series of joint operating agreements on a well
by well or
 
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Prospect area by Prospect area basis, each of which will be based upon the AAPL
model form attached hereto as Exhibit 4.3(c) naming Investor LLC as
“co-operator” or (y) Carrizo designating Investor LLC (or its designee) as
“co-operator” under the Operating Agreement.  The division of rights, duties and
responsibilities of the Parties as “co-operator” shall be negotiated in good
faith with the goal of developing a mutually satisfactory and workable mechanism
by which the Parties shall jointly operate the Properties.  If the Parties are
unable to reach mutual agreement on alternative (x) or (y) above, the Parties
shall work together in good faith to develop an alternative solution.
 
ARTICLE 5
OPERATING AGREEMENT AND CERTAIN RESTRICTIONS
 
5.1 Operations Subject to Laws, Contract and Operating Agreement.  The
activities of Carrizo and Investor LLC with respect to the Designated Area shall
be conducted subject to applicable Laws and the terms of this Agreement and the
Operating Agreement.
 
5.2 Operating Agreement.  Investor LLC and Carrizo are parties to the Operating
Agreement, which governs the Joint Operations with respect to the exploration
and development of the Properties.  Notwithstanding any provision of the
Operating Agreement to the contrary, Investor LLC and Carrizo agree as follows:
 
(a) The AMI shall not be reduced to the Prospect areas in accordance with
Article 20.3(A) of the Operating Agreement until the first to occur of:  (i)
December 31, 2010; (ii) the Minimum Commitment Date; (iii) Carrizo designates
Investor LLC (or its designee) as “co-operator” of the Properties pursuant to
Section 4.1(c); and (iv) a request by Investor LLC that it (or its designee) be
designated as “co-operator” of the Properties pursuant to Section 4.3(c) (such
date, the “JOA Trigger Date”).
 
(b) Until the Minimum Commitment Date, if either Carrizo or Investor LLC is a
Non-Consenting Party in a Subsequent Exclusive Operation proposed by the other
Party pursuant to Article 7.4(B)(2) of the Operating Agreement (the “Proposing
Party”), then the consequence for such Non-Consenting Party’s election not to
participate in such Subsequent Exclusive Operation shall not be as set forth in
Article 7.4(C)(2)(a) of the Operating Agreement, but shall consist of the
following:  (i) the Proposing Party shall designate a Drilling Unit consisting
of 320 acres around the proposed location of the wellbore as part of the
proposal to conduct such Subsequent Exclusive Operation, and (ii) the
Non-Consenting Party shall permanently sell, transfer and convey to the
Proposing Party all of such Non-Consenting Party’s Participation Interest within
such Drilling Unit at a price equal to the aggregate acquisition cost actually
paid by the Non-Consenting Party for its Participation Interest in the Drilling
Unit, plus the aggregate amount of all direct costs actually paid by the
Non-Consenting Party under the Operating Agreement attributable to the Drilling
Unit after the acquisition thereof.  Any Transfer under this Section 5.2(b) will
be subject to the preemptive rights, excluding rights otherwise entitled to the
Non-Consenting Party, set forth in Article 12.2(G) of the Operating Agreement.
 
(c) Attached hereto as Exhibit 5.2(c) is a proposed budget for the period from
October 1, 2008 through December 31, 2009 (the “Proposed Forecast”).  Until the
 
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Minimum Commitment Date, Carrizo shall not propose any Work Program and
Budget  pursuant to Article 6.1(B) of the Operating Agreement that (when added
to expenditures proposed under any prior Work Program and Budget) would include
expenditures for:
 
(i) the “G&G” and “drilling and completion” categories that would exceed the
total amount shown for each such category for each Prospect area identified in
the Proposed Forecast by more than 15% for the period covered by the Proposed
Forecast; and
 
(ii) land acquisitions for the Joint Account that, in the aggregate, exceed the
total shown for the “land” category for each Prospect area identified in the
Proposed Forecast at price ranges (on a per acre basis) agreed to by the
Operating Committee for the period covered by the Proposed Forecast.
 
(d) Until the Minimum Commitment Date, Carrizo agrees that the aggregate
expenditures under each six-month Work Program and Budget it proposes pursuant
to Article 6.1(B) of the Operating Agreement, commencing with the Work Program
and Budget it proposes for the six-month period that begins October 1, 2009,
will not exceed 115% of the aggregate expenditures under the six-month Work
Program and Budget proposed by it for the calendar quarter immediately preceding
each such proposed Work Program and Budget.
 
(e) Until the Minimum Commitment Date, with respect to each Prospect for which
any drilling Operations are proposed in a Work Program and Budget, the Operating
Committee will vote on a well-by-well basis with respect thereto.  Until the
Minimum Commitment Date, Investor LLC shall cause each of its representatives on
the Operating Committee to vote in favor of any Exploration Well and associated
items as proposed by Carrizo in the Work Program and Budget.
 
(f) Until Investor LLC (or its designee) is designated as “co-operator” of the
Properties pursuant to Section 4.1(c) or 4.3(c), any amounts payable to the
Operator by Investor LLC in respect of proposals approved by Investor LLC under
Article 5.12 of the Operating Agreement (Voting by Notice) that are in excess of
the amounts that would otherwise be payable by Investor LLC as contemplated by
the Work Program and Budget in effect at such time shall be due by the later of
(i) fifteen (15) Business Days from Investor LLC’s approval and (ii) the first
Business Day of the Calendar Quarter immediately following such approval
notwithstanding any other time limit set forth in Article 1.6 of Exhibit D to
the Operating Agreement (Payments and Advances).
 
(g) The minimum percent of Participating Interest necessary to approve decisions
of the Operating Committee shall not be modified as provided in Article 5.9(B)
under the Operating Agreement until the JOA Trigger Date.

(h) In the event of a conflict between the provisions of this Agreement and the
provisions of the Operating Agreement, the provisions of this Agreement shall
prevail.
 
5.3 Restrictions on Avista’s Investments in the AMI.  Without the prior written
consent of COGI, which may not be unreasonably withheld, Avista shall not (and
shall
 
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cause its controlled Affiliates not to), directly or indirectly, make any
controlling investment in any third Person engaged or that engages in the
exploration, exploitation or development of Hydrocarbons within the AMI, except
as provided in this Agreement and except for such activities that are de
minimis or incidental to activities in the AMI other than exploration,
exploitation or development of Hydrocarbons.
 
5.4 Termination of Land Bank Agreement.  Carrizo and Investor LLC hereby agree
that the Land Bank Agreement is terminated as of the Execution Date.
 
ARTICLE 6
INFORMATION RIGHTS
 
Within forty-five (45) days following each calendar quarter after the Execution
Date, Carrizo shall provide Investor LLC with a written report discussing the
results of Joint Operations with respect to the Properties that is in
substantial compliance with the substantive requirements of Item 303 under
Regulation S-K (17 CFR Part 229.310) (but reduced to take into account the
matters for which such report will be used).  The Avista Parties shall provide
COGI with such information concerning the Avista Parties as COGI may reasonably
request in order to timely comply with COGI’s reporting obligations under the
Securities Exchange Act of 1934, as amended, or COGI’s disclosure obligations
with respect to any registration statement it files under the Securities Act of
1933, as amended.
 
ARTICLE 7
REPRESENTATIONS
 
7.1 Representations and Warranties of the Carrizo Parties.  The Carrizo Parties
hereby represent and warrant to the Avista Parties as of the Execution Date
that:
 
(a) Ownership of Carrizo.  COGI owns, directly or indirectly, all of the issued
and outstanding securities of Carrizo.
 
(b) Organization and Good Standing.  Each of the Carrizo Parties is an entity
duly incorporated or otherwise organized, validly existing and in good standing
under the Laws of the jurisdiction of its incorporation or organization (as
applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted.
Neither of the Carrizo Parties is in violation of any of the provisions of its
respective certificate or articles of incorporation, bylaws or other
organizational, charter or equivalent documents. Each of the Carrizo Parties is
duly qualified to conduct business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification necessary,
except where the failure to be so qualified or in good standing, as the case may
be, would not reasonably be expected to have a material and adverse affect on
the ability of such Carrizo Party to perform its obligations under this
Agreement.
 
(c) Authorization of Agreement.  Each of the Carrizo Parties has the requisite
power and authority to enter into and to consummate the transactions
contemplated by this Agreement and otherwise to carry out its obligations
hereunder. The execution and
 
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delivery of this Agreement by each of the Carrizo Parties and the consummation
by such Carrizo Party of the transactions contemplated hereby have been duly
authorized by all necessary action on the part of such Carrizo Party and no
further action is required by such Carrizo Party, its board of directors or
other governing body or shareholders, members or partners in connection
herewith.  This Agreement has been duly executed by each Carrizo Party and, when
executed and delivered by the Avista Parties in accordance with the terms
hereof, will constitute the valid and binding obligation of such Carrizo Party,
enforceable against such Carrizo Party in accordance with its terms, except (i)
as limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other Laws of general application affecting enforcement of creditors’ rights
generally and (ii) as limited by Laws relating to the availability of specific
performance, injunctive relief or other equitable remedies.  COGI has delivered
to Avista a certified copy of resolutions of COGI’s Board of Directors approving
the transactions contemplated by this Agreement and authorizing COGI to fund
Carrizo to meet its commitments hereunder.
 
(d) No Violation.  The execution, delivery and performance of this Agreement by
the Carrizo Parties and the consummation by the Carrizo Parties of the
transactions contemplated hereby do not (i) conflict with or violate any
provision of either of the Carrizo Parties’ certificate or articles of
incorporation, bylaws or other organizational, charter or equivalent documents,
or (ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or
instrument (evidencing a Carrizo Party’s debt or otherwise) or other
understanding to which either of the Carrizo Parties is a party or by which any
property or asset of either Carrizo Party is bound or affected, or (iii) subject
to any approvals which are expressly required under the terms of any applicable
Law, in order to consummate the transactions contemplated by this Agreement,
result in a violation of any Law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or Governmental Authority to which
either Carrizo Party is subject; except in the case of each of clauses (ii) and
(iii), such as would not, individually or in the aggregate, reasonably be
expected to have a material and adverse affect on the ability of either Carrizo
Party to perform its obligations under this Agreement.
 
(e) Brokers.  No broker, finder or investment banker is entitled to any
brokerage, finder’s or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Carrizo Parties.
 
(f) All AMI Oil and Gas Interests.  The Oil and Gas Interests described in
Exhibit 2.1(a) comprise all of the Carrizo Parties’ Oil and Gas Interests within
the AMI through July 31, 2008.
 
7.2 Representations and Warranties of the Avista Parties.  The Avista Parties
represent and warrant to the Carrizo Parties as of the date of the Execution
Date that:
 
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(a) Ownership of Investor LLC.  Avista owns, directly or indirectly, all of the
issued and outstanding securities of ACP II; Avista Offshore owns, directly or
indirectly, all of the issued and outstanding securities of ACP II Offshore; and
except for the Profit Interest, ACP II and ACP II Offshore own all of the issued
and outstanding securities of Investor LLC.  Avista GP is the sole general
partner of and controls each of Avista and Avista Offshore.
 
(b) Organization and Good Standing.  Each of the Avista Parties is an entity
duly incorporated or otherwise organized, validly existing and in good standing
under the Laws of the jurisdiction of its incorporation or organization (as
applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted.
Neither of the Avista Parties is in violation of any of the provisions of its
respective certificate or articles of incorporation, bylaws or other
organizational, charter or equivalent documents. Each of the Avista Parties is
duly qualified to conduct business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification necessary,
except where the failure to be so qualified or in good standing, as the case may
be, would not reasonably be expected to have a material and adverse affect on
the ability of such Avista Party to perform its obligations under this
Agreement.
 
(c) Authorization of Agreement.  Each of the Avista Parties has the requisite
power and authority to enter into and to consummate the transactions
contemplated by this Agreement and otherwise to carry out its obligations
hereunder. The execution and delivery of this Agreement by each of the Avista
Parties and the consummation by such Avista Party of the transactions
contemplated hereby have been duly authorized by all necessary action on the
part of such Avista Party and no further action is required by such Avista
Party, its board of directors or other governing body or shareholders, members
or partners in connection herewith.  This Agreement has been duly executed by
each Avista Party and, when executed and delivered by the Carrizo Parties in
accordance with the terms hereof, will constitute the valid and binding
obligation of such Avista Party, enforceable against such Avista Party in
accordance with its terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other Laws of general application
affecting enforcement of creditors’ rights generally and (ii) as limited by Laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies. The Avista Parties have delivered to COGI a certified copy
of minutes from a meeting of the Investment Committee of Avista and Avista
Offshore, approving the transactions contemplated by this Agreement and
authorizing Avista and Avista Offshore to fund Investor LLC to meet its
commitments hereunder.
 
(d) No Violation.  The execution, delivery and performance of this Agreement by
the Avista Parties and the consummation by the Avista Parties of the
transactions contemplated hereby do not (i) conflict with or violate any
provision of either of the Avista Parties’ certificate or articles of
incorporation, bylaws or other organizational, charter or equivalent documents,
or (ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
 
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notice, lapse of time or both) of, any agreement, credit facility, debt or
instrument (evidencing a Avista Party’s debt or otherwise) or other
understanding to which either of the Avista Parties is a party or by which any
property or asset of either Avista Party is bound or affected, or (iii) subject
to any approvals which are expressly required under the terms of any applicable
Law, in order to consummate the transactions contemplated by this Agreement,
result in a violation of any Law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or Governmental Authority to which
either Avista Party is subject; except in the case of each of clauses (ii) and
(iii), such as would not, individually or in the aggregate, reasonably be
expected to have a material and adverse affect on the ability of either Avista
Party to perform its obligations under this Agreement.
 
(e) Brokers.  No broker, finder or investment banker is entitled to any
brokerage, finder’s or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Avista Parties.
 
(f) All AMI Oil and Gas Interests.  The Oil and Gas Interests described in
Exhibit 2.1(b) comprise all of Investor LLC’s Oil and Gas Interests within the
AMI as of the Execution Date.
 
7.3 Disclaimer of Other Representations.  Except for the representations and
warranties set forth in Sections 7.1 and 7.2 hereof or representations and
warranties expressly set forth in any of the other Transaction Documents, the
Carrizo Parties and the Avista Parties make no, and disclaim any, warranty or
representation of any kind, either express, implied, statutory, or otherwise,
including any representation or warranty as to (a) title, (b) merchantability of
all or any part of the Properties dedicated or Transferred hereunder,
(c) fitness for all or any part of the Properties for any particular purpose, or
(d) conformity of all or any part of the Properties dedicated or Transferred
hereunder to models or samples of materials.  Except as set forth in
Sections 7.1 and 7.2, the Carrizo Parties and the Avista Parties make no
warranty or representation, express, implied, statutory, or otherwise, as to the
accuracy or completeness of any data, reports, records, projections,
information, or materials now, heretofore, or hereafter furnished or made
available to the other Parties in connection with the Properties dedicated or
transferred hereunder, including any description of the Properties dedicated or
transferred hereunder, pricing assumptions, or quality or quantity of
Hydrocarbon reserves (if any) attributable to the Properties dedicated or
Transferred hereunder, or the ability or potential of the properties dedicated
or Transferred hereunder to produce Hydrocarbons.
 
ARTICLE 8
RELATIONSHIP OF THE PARTIES
 
8.1 Independent Co-Owners.  Except as provided in Exhibit 8.1, it is not the
intention of the Parties to create, nor shall this Agreement be construed as
creating a relationship
 
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of partnership, association, principal and agent, joint venture or a mining or
other association, or otherwise render the Parties liable as partners.  The
liability of the Parties hereto shall be several and not joint or collective.
 
8.2 Right of Competition.  Except as expressly set forth in Sections 5.3 and the
Operating Agreement, nothing in this Agreement shall preclude any Party, or its
Affiliates, from engaging in any business or purchasing any property of any sort
whatsoever, whether or not in competition with Operations under this Agreement,
without consulting the other Party or inviting or allowing the other Party to
participate therein, and the doctrine of corporate opportunity, or any analogous
doctrine, shall not apply.  Except as expressly set forth in the Transaction
Documents, no Carrizo Party shall have any duty, including any fiduciary duty,
to any Avista Party, and vice versa.
 
ARTICLE 9
GOVERNING LAW; DISPUTE
RESOLUTION AND LIMITATION OF LIABILITY
 
9.1 Governing Law.  This Agreement and the legal relations between the Parties
shall be governed by and construed in accordance with the Laws of the State of
Texas, USA without regard to principles of conflicts of Laws.
 
9.2 Dispute Resolution.
 
(a) Any dispute, controversy or claim arising out of or in relation to or in
connection with this Agreement, including without limitation any dispute as to
the construction, validity, interpretation, enforceability or breach of this
Agreement, shall be mediated by a mutually acceptable mediator, which shall
commence within thirty (30) days after written notice by one Party to the other
demanding mediation.  No Party may unreasonably withhold consent to the
selection of a mediator.  The mediation shall be held in Honolulu, Hawaii.  The
Carrizo Parties and the Avista Parties shall share the costs of the mediation
equally, except that each Party shall bear its own costs and expenses, including
attorneys’ fees, witness fees, travel expenses and preparation costs.
 
(b) If the Parties are unable to resolve such dispute, controversy or claim
pursuant to the provisions in Section 9.2(a) within thirty (30) days after the
commencement of such mediation, a Party may seek relief from a court of
competent jurisdiction.  The Parties hereby irrevocably submit to the exclusive
jurisdiction of the state courts of Texas located in Houston, Texas or the
federal courts of the United States of America located in Houston, Texas and
appropriate appellate courts therefrom, and each Party hereby irrevocably agrees
that all claims in respect of such dispute, controversy or claim may be heard
and determined in such courts.  The Parties hereby irrevocably waive, to the
fullest extent permitted by applicable Laws, any objection which they may now or
hereafter have to the laying of venue of any such dispute,
 
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controversy or claim brought in any such court or any defense of inconvenient
forum for the maintenance of such dispute, controversy or claim. Each of the
Parties hereby irrevocably waives all right to trial by jury in any action,
proceeding or counterclaim arising out of or relating to this Agreement.
 
9.3 Actual Damages.  No Party shall be liable or have any responsibility to any
other Party for any indirect, special, consequential or punitive damages
including lost earnings or profits.  Such limitation on liability shall apply to
any claim or action, whether it is based in whole or in part on contract,
negligence, strict liability, tort, statute or any other theory of liability.
 
ARTICLE 10
MISCELLANEOUS
 
10.1 Counterparts.  This Agreement may be executed in counterparts, and by
different Parties in separate counterparts, each of which shall be deemed an
original instrument, but all such counterparts together shall constitute one
agreement.
 
10.2 Notice.  All notices, requests, demands, claims, and other communications
hereunder will be in writing.  Any notice, request, demand, claim, or other
communication hereunder shall be deemed duly given if (and then two (2) Business
Days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
 
If to either of the Avista Parties:
 
If to either of the Carrizo Parties:
     
ACP II Marcellus LLC
 
Carrizo Oil & Gas, Inc.
1000 Louisiana, Suite 1200
 
1000 Louisiana St., Suite 1500
Houston, Texas  77002
 
Houston, Texas  77002
Telephone:  713-328-1085
 
Telephone:  713-328-1073
Fax:  713-328-1097
 
Fax:  713-328-1060
Attn.:  Robert Cabes
 
Attn.:  Gerry Morton

 
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
facsimile, ordinary mail, or electronic mail), but no such notice, request,
demand, claim, or other communication shall be deemed to have been duly given
unless and until it actually is received by the intended recipient.  Any Party
may change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Party notice in
the manner herein set forth.
 
10.3 Expenses.  Each Party shall pay its own legal fees and other costs and
expenses incurred by it in connection with the negotiation, execution and
delivery of this Agreement and the Operating Agreement.
 
10.4 Transfer Taxes.  All Transfer Taxes payable with respect to the Properties,
including those that may be incurred in connection with the Property Transfers
contemplated by
 
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Section 2.3(c) hereof, shall be considered a joint interest expense and
allocated in accordance with the Operating Agreement.
 
10.5 Captions.  The captions in this Agreement are for convenience only and
shall not be considered a part of or affect the construction or interpretation
of any provision of this Agreement.
 
10.6 Waivers.  Any failure by any Party to comply with any of its obligations,
agreements, or conditions herein contained may only be waived in writing in an
instrument specifically identified as a waiver and signed by the Party to whom
such compliance is owed.  No waiver of, or consent to a change in, any provision
of this Agreement shall be deemed or shall constitute a waiver of, or consent to
a change in, any other provisions hereof, nor shall such waiver constitute a
continuing waiver unless expressly provided in the waiver.
 
10.7 Assignment.  Except for assignments for the benefit of lenders in
connection with commercial financing activities (in which case the assigning
Party shall not be relieved of its obligations hereunder) and as provided in
Article 4, no Party may assign all or any part of its rights and obligations
under this Agreement without the prior written approval of each other
Party.  This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective permitted successors and assigns.
 
10.8 Amendment.  This Agreement may be amended or modified only by an agreement
in writing executed by all Parties expressly identifying it as an amendment or
modification hereof.
 
10.9 No Third Person Beneficiaries.  Nothing in this Agreement shall entitle any
Person other than the Parties to any claim, cause of action, remedy, or right of
any kind.
 
10.10 Entire Agreement.  This Agreement and the Operating Agreement constitute
the entire agreement between the Parties pertaining to the subject matter hereof
and supersede all prior agreements, understandings, negotiations, and
discussions, whether oral or written, of the Parties with respect thereto.
 
10.11 Term.  This Agreement is effective as of the Effective Date and shall
continue in effect until the Operating Agreement terminates, at which time this
Agreement shall terminate except as to rights and obligations previously
accrued.
 
10.12 Survival.  Articles 8 and 9 and Sections 10.2, 10.3, 10.12 and 10.13 shall
survive the termination of this Agreement.
 
10.13 References and Construction.  In this Agreement:
 
(a) References to any gender includes a reference to all other genders;
 
(b) References to the singular includes the plural, and vice versa;
 
(c) Reference to any Article or Section means an Article or Section of this
Agreement;
 
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(d) Reference to any Exhibit means an Exhibit to this Agreement, all of which
are incorporated into and made a part of this Agreement;
 
(e) Unless expressly provided to the contrary, “hereunder”, “hereof”, “herein”,
and words of similar import are references to this Agreement as a whole and not
any particular Section or other provision of this Agreement;
 
(f) “Include” and “including” shall mean include or including without limiting
the generality of the description preceding such term and are used in an
illustrative sense and not a limiting sense;
 
(g) “Or” is not exclusive unless the context requires otherwise;
 
(h) No consideration shall be given to the fact or presumption that one party
had a greater or lesser hand in drafting this Agreement; and
 
(i) Capitalized terms used in this Agreement that are not otherwise defined are
used with the respective meanings given thereto in the Operating Agreement.
 
[Signature Page Follows]
 

 
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed on the
Execution Date and effective as of the Effective Date.
 
ACP II MARCELLUS LLC
CARRIZO OIL & GAS, INC.
   
By:       ACP II AMS LP,
 
its Manager
By:       /s/ S.P. Johnson, IV
 
Name:  S.P. Johnson, IV
By:    Avista Capital Partners II, L.P.,
Title:  President and Chief Executive
its General Partner
           Officer
   
By:    Avista Capital Partners II GP, LLC
CARRIZO (MARCELLUS) LLC
its General Partner
     
By:    /s/ Robert L. Cabes, Jr.
By:       /s/ S.P. Johnson, IV
Name:  Robert L. Cabes, Jr.
Name:  S.P. Johnson, IV
Title:  Partner
Title:  President and Chief Executive
 
           Officer
AVISTA CAPITAL PARTNERS II, L.P.
     
By:    Avista Capital Partners II GP, LLC,
 
its General Partner
     
By:    /s/ Robert L. Cabes, Jr.
 
Name:  Robert L. Cabes, Jr.
 
Title:  Partner
 

 
[Signature Page to the Participation Agreement]

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Exhibit 2.1(a)
 
Properties Dedicated by the Carrizo Parties
 
[See Attached]
 
 
Exhibit 2.1(a)

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Exhibit 2.1(b)
 
Properties Dedicated by Investor LLC
 
[See Attached]
 
Exhibit 2.1(b)

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Exhibit 4.3(c)
 
AAPL Form 610 U.S. Onshore Model Form Operating Agreement (1989)
 
[See Attached]
 

 
Exhibit 4.3(c)

--------------------------------------------------------------------------------

 
Exhibit 5.2(c)
 
Proposed Forecast Expenditures through December 31, 2009
 
[See Attached]
 
Exhibit 5.2(c)

--------------------------------------------------------------------------------

 
Exhibit 8.1
 
Tax and Ownership Interest Adjustment Provisions
 
[See Attached]

Exhibit 8.1

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